Ratings agency Fitch has assigned Light & Wonder – previously Scientific Games – a first-time BB(EXP) Issuer Default Rating (IDR) with a Rating Outlook of Stable, supported by the company’s more conservative capital structure and efforts to pay down debt.
Fitch has also assigned a BBB-(EXP)/RR1 rating to the company’s new senior secured credit facility, consisting of a US$750 million revolver and US$2.2 billion term loan, and a BB(EXP)/RR4 rating to its 2028 and 2029 existing unsecured notes.
The first-time BB(EXP) rating follows the divesture of the group’s sports betting and lottery businesses with Fitch explaining that BB(EXP) “reflects its improved credit profile pro forma for the planned debt paydown with proceeds from the sale of its lottery and sports betting segments.”
On the back of US$7 billion in combined asset sales, gross leverage is expected to decline to the low-3x range with FCF (free cash flow) margin sustaining in the high-teens percent, described as “both solid for a gaming supplier and mobile developer.”
“The more conservative capital structure will support the company’s increased focus on casual mobile gaming, which is extremely competitive and hit-driven in nature,” Fitch said. “The company maintains a strong position in [its] traditional slots and table game business, as well as social gaming and iGaming.”
As previously reported by Inside Asian Gaming, the sale of the sports betting and lottery segments was seen as an effective means of reducing debt totaling more than US$9 billion as of 30 June 2021.
While Fitch noted that divesture of the lottery segment removes a stable and diversifying cash flow stream with healthy long-term growth rates, it also views the company’s debt paydown positively.
“Pro forma for the pending dispositions, the company will be a diversified gaming supplier with exposure to traditional gaming (slots, tables, systems), iGaming, social gaming and casual mobile gaming,” Fitch said.
“[It] remains a diversified gaming supplier with strong market share, despite the sale of the less cyclical lottery business.”
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