PRESS RELEASE
Bally Technologies, Inc. (NYSE: BYI), a leader in slots, video machines, casino management, and networked and server-based systems for the global gaming industry, says it has obtained commitments for US$700 million of new senior secured credit facilities comprised of a US$400-million, five-year revolving credit facility and a US$300-million, five-year term loan (collectively, the “Credit Facilities”).
Bally will use the net proceeds from the new Credit Facilities to fund the stock tender offer announced today, to fund share repurchases, to refinance its existing credit facilities (US$162.4 million outstanding as of March 31, 2011), to pay fees and expenses incurred in connection with the transactions, to provide for ongoing working capital, and for other general corporate purposes. The new Credit Facilities are expected to close on or about April 13, 2011 and fund on or about May 6, 2011, simultaneous with the closing of the stock tender offer. At funding and giving effect for the stock tender offer, Bally will have at least US$150 million of undrawn availability under its new revolver.
The new Credit Facilities will initially be priced at LIBOR +175bps (assuming a gross leverage ratio of 2.0) and will be subject to a leverage-based pricing grid and a maximum leverage and a minimum interest coverage covenant. A detailed description of the new Credit Facilities will be contained in the offer to purchase for the stock tender offer which is expected to launch April 8, 2011. Merrill Lynch, Pierce, Fenner & Smith Incorporated; Wells Fargo Securities, LLC; and Union Bank, N.A. will act as joint lead arrangers and joint book managers. The remaining syndicate is comprised of other commercial banks.
“Our ability to more than double the size of our Credit Facilities with a more favorable pricing grid and better terms demonstrates the strength of our business and the free cash flow it generates,” said Neil Davidson, the Company’s Chief Financial Officer. “The new Credit Facilities will provide us incremental flexibility to pursue strategic initiatives as well as the opportunity to better optimize our capital structure.”
Share Repurchase Plan
During the third quarter, Bally repurchased approximately 898,000 shares for a total of US$35.1 million, leaving US$27.3 million available under its existing share repurchase plan.
On April 6, 2011, the Company’s Board of Directors increased the share-repurchase program to an amount equal to US$550 million minus the amount repurchased in the tender offer (which is expected to be US$400 million). Under the new Credit Facilities, the Company will have unlimited capacity to repurchase its common stock or make other restricted payments as long as its gross leverage ratio is below 2.0 and may make up to US$100 million in restricted payments per year if its gross leverage is above 2.0.
“We believe investing in our own shares continues to be a prudent use of our financial resources as we believe our stock currently offers a compelling value,” Davidson said. “The new share-repurchase program is consistent with our commitment to return value to our stockholders.”
Fiscal 2011 Business Update
The Company updated fiscal 2011 guidance for Diluted Earnings per Share (“Diluted EPS”) from continuing operations to US$1.82 to US$1.95, with the fiscal fourth quarter’s Diluted EPS expected to exceed the fiscal third quarter’s Diluted EPS. This updated Diluted EPS guidance range does not reflect the impact of the pending stock tender offer and debt refinancing due to the uncertainty as to the number of shares that will be tendered.
The updated guidance reflects lower than expected systems revenue caused from the timing of decisions for large installations, and lower than expected gross margins in gaming equipment due to a higher than anticipated mix of Pro Series™ cabinet sales. In addition, the Company now believes it will no longer achieve US$205 million in systems revenue for fiscal 2011 and will provide a further update on its fiscal third quarter conference call on April 28, 2011.
“Short-term market conditions remain difficult, with the timing of large systems implementations becoming more challenging to predict,” said Richard M. Haddrill, the Company’s Chief Executive Officer. “However, we continue to be pleased with the strong performance in our gaming operations business, the initial acceptance of our new Pro Series cabinets, and our business-specific initiatives. Our systems outlook remains strong, and this month we will begin selling the first ALPHA 2™ titles Playboy Hot ZoneTM and Ole Jalapeños™.”
The Company has provided this updated range of earnings guidance for fiscal 2011 to give investors general information on the overall direction of its business at this time. The updated guidance provided is subject to numerous uncertainties, including, among others, overall economic and capital-market conditions, the market for gaming devices and systems, changes in gaming legislation, the timing of new jurisdictions and casino openings, competitive product introductions, complex revenue-recognition rules related to the Company’s business, and assumptions about the Company’s new product introductions and regulatory approvals. The Company does not intend and undertakes no obligation to update its forward-looking statements, including forecasts, potential opportunities for growth in new and existing markets, and future prospects for proposed new products. Accordingly, the Company does not intend to update guidance during the quarter. Additional information about the factors that could potentially affect the Company’s financial results included in today’s press release can be found in the Company’s Annual Report on Form 10-K and quarterly reports on Form 10-Q.
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