Global gaming supplier Light & Wonder will likely change its focus from share repurchases to debt reduction in 2027, reducing leverage from 3.5x currently to around 2.9x by the end of next year and to 2.5x longer term, according to ratings agency Fitch.
The forecast came with Fitch this week revising the outlook of Light & Wonder from Stable to Positive and affirming its Long-Term Issuer Default Rating (IDR) at “BB,” citing a strengthening leverage profile and EBITDA growth across all business segments.
In revising the outlook to Positive, the ratings agency noted that Light & Wonder’s EBITDA leverage had improved modestly in the first half of 2026 from 3.6x to 3.5x but that this should accelerate below the company’s positive rating threshold of 3.0x in 2027, reflecting management’s focus on deleveraging and an improved credit profile. Near-term deleveraging will likely be driven by voluntary repayments on the 2030 senior secured revolver, 2028 term loan A or 2029 term loan B, it added.
“Share repurchases, which were significant in 2025 given Light & Wonder’s Nasdaq delisting and transition to a sole primary listing on the Australian Securities Exchange, could moderate as strong cash flow is increasingly directed toward debt reduction,” said analysts Vineet Prasad, David Lowenstein and Steven Marks.
“Over the longer term, leverage could decline to about 2.5x as Light & Wonder advances toward its 2028 US$2 billion adjusted EBITDA target, at the low end of its 2.5x to 3.5x net Adjusted EBITDA leverage range.”
According to Fitch, Light & Wonder’s path toward deleveraging will be aided by an improved free cash flow margin of close to 20%, supported by EBITDA growth from potential market-share gains in core gaming, further expansion into adjacent markets, continued development of its social gaming content pipeline and relatively stable capex intensity.
Although traditional gaming represented around 65% of revenue as of the June 2026 quarter, Light & Wonder is, Fitch observed, a “moderately diversified” company that continues to expand into digital adjacencies amid intense competition in the traditional slot market, a muted replacement cycle and an uncertain cadence of new casino openings.
Fitch added, “SciPlay is an important revenue contributor, accounting for roughly 25% of Light & Wonder’s revenue. The segment could gain market share through the development of high-quality games, effective monetization and disciplined customer-acquisition spending.”
RelatedPosts
