Game, digital spin-off doesn't affect IGT rating

Moody's Investors Service Inc. says the "planned spin-off" of International Gaming Technology (IGT) Plc into its global gaming and play digital business "does not affect" IGT's credit rating.

IGT said in a joint update on Feb. 29 that it will separate the two divisions and combine them with another gaming technology supplier, Everly Holdings. The update added that the combined business would be "approximately $6.2 billion in terms of corporate value."

Moody's said in a recent follow-up that the status quo applied to IGT's rating includes a "Ba1" corporate family rating and a "stable" outlook.

A statement on Feb. 29 said about $2.6 billion of the proceeds would be distributed to IGT. $1 billion of the proceeds would go toward refinancing Avery's existing debt, with the remainder going toward paying the merger's financing fees.

Moody's said: "IGT expects to allocate approximately $2 billion to repay existing IGT debt and allocate the remaining amount to separation and sale costs, tax outflows and general corporate purposes."

The transaction is expected to be completed later this year or early 2025, with the necessary approval of shareholders and regulators.

Moody's said: "With this deal, IGT will ultimately be left to the global lottery business and establish itself as a pure lottery company."

The existing IGT corporation "will change its name to a new ticker symbol and continue to trade on the NYSE," according to a statement on February 29.

The agency said it expected IGT's pre-amortization leverage to be "lower than it is" and EBITDA (earnings before interest, tax and depreciation) leverage to be "remain below 3.0 times" and therefore noted that its deal with Avery "does not affect" IGT's rating.

IGT is set to report fourth-quarter and full-year earnings on Tuesday. Net debt was $5.25 billion as of September 30, compared with $5.15 billion on December 31, 2022.

Moody's noted that IGT's lottery business, particularly the existing structure of the lottery business, is focused on Italy.

"IGT is constrained by contract concentration and renewal risk, with the top 10 contracts accounting for nearly two-thirds of total sales," the rating agency noted. "The company's two Italian contracts account for more than 30% of total sales."

In addition, "lotto renewals require capital and significant prepayment cash payments for Italian contracts. 파워볼사이트

"These factors, together with the Company's shareholder dividend and minority interest dividend, will generate significant cash use in the future," it noted.

Moody's also observed: "IGT's credit profile benefits from high levels of recurring revenue from its lottery business, with an EBITDA margin approaching 50%

"IGT has benefited additionally from the resilience demonstrated in the lottery industry and the company's very good performance."