Global ratings agency Moody’s Investors Service has affirmed Scientific Games’ Corporate Family Rating at B3 but upgraded its outlook from negative to stable due to signs of recovery in the company’s gaming operations.
Moody’s said in a Friday note that the reopening of more gaming facilities worldwide since last year’s closures had favorably increased revenue and operating income for Scientific Games, with ongoing improvement expected despite the COVID-19 pandemic still running its course.
“The outlook change also reflects the company’s good cost discipline and more resilient lottery business,” it said. “These factors, along with a pullback in capex, enabled the company to generate over US$280 million of positive free cash flow in 2020 and Moody’s projects a similar free cash flow level can be achieved in 2021 despite an increase in capex.”
Under the Moody’s ratings system, Corporate Family Ratings represent an opinion of a company’s ability to honor all of its financial obligations, with B3 suggesting Scientific Games’ obligations are currently speculative and high risk.
The agency said the rating reflects the “meaningful revenue and earnings decline from efforts to contain the coronavirus and the potential for an uneven recovery as its gaming customers’ properties have reopened.”
However, while the debt-to-EBITDA leverage level is expected to remain above 8x through 2021, Moody’s noted that Scientific Games is also well positioned to benefit from the growth of digital gaming products and sports betting.
“Scientific Games owns a large portfolio of complementary gaming products and services, both digital and non-digital, that it can utilize and cross-sell globally among its various distribution platforms,” it said.
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