GVC slashes costs on bwin.party price with refinancing

GVC slashes costs on bwin.party price with refinancing

Wednesday, August 3, 2016 Posted by Andy McCarron
GVC has surprised the market with a new debt deal

If GVC should happen to have a song on repeat over tannoy at the company’s City of London headquarters it would probably be the old McFadden & Whitehead disco classic ‘Ain’t No Stopping Us Now’.

The latest slice of good news in what has already been a triumphant six months for the UK-listed business came this week when it announced a debt refinancing that substantially cut the interest rate it was paying on the large chunk of money the company borrowed to pay for the BwinParty transaction.

The new €250m facility agreed with Nomura comes with an interest rate of the standard Euribor rate plus 2%. It represents a huge reduction on the 11.5% above Euribor rate on the €400m term loan facility agreement it reached with Cerberus at the time of the BwinParty buyout in February.

A total of €386.5m remains outstanding on that loan; the remaining €136.5m left once the new loan is in place will be repaid from GVC’s cash resources. The company said the refinancing would be completed in February next year and will save the company a total of €43.3m in interest payments a year. It added that it was now on track to resume paying dividends to shareholders as of next year.

Analysts were quick to applaud the move, suggesting its significance went beyond just the money saved. “This is arguably the most significant announcement from the group since the acquisition of BwinParty was completed, dispelling any unfounded concerns around the group’s business model and quality of earnings,” said Simon French at house broker Cenkos.

Jane Asncombe, analyst at Edison Investment Research added that the debt deal represented “a big vote of confidence in GVC’s progress integrating its transformational bwin acquisition”.

GVC has been busy in the past few months polishing its reputation among financial institutions. It announced earlier in the summer that it was moving its shares to the main list in London from Aim and subsequently it named Investec as joint broker, joining the aforementioned Cenkos. These moves follow on from the news in June that it had received a continuation licence in New Jersey (where it inherited BwinParty’s online gambling joint venture with the Borgata Casino) and the signing of a 10-year B2B licensing deal with Betfred.

GVC chief executive Kenneth Alexander said of the new debt deal that the quality of the lending partner and the new rate secured on the loan were testament to the progress the enlarged group had made in the last six months. “Not only does the refinancing significantly reduce our financing costs but it enables us to drive further shareholder value through investment and paves the way for a return to dividend payments in 2017,” he added.

In its debt announcement the company also released a brief trading statement that stated that revenues per day in July were up 26% on last year and up 31% in constant currency, boosted by the Euro 2016 tournament.

Simon Davies, analyst at Canaccord Genuity said the July run rate represented a “significant acceleration” from the run rate reported just last month of 16% on a constant currency basis.

Nevertheless, Davies said he was not moving his earnings forecast on the company just yet. “We leave underlying EBITDA forecasts unchanged, given that the Euro 2016 benefits were a ‘one off’, and we are now entering the period of maximum execution risk on BwinParty integration, as it migrates GVC sportsbook customers over to the BwinParty platform.”

Totally Gaming says: GVC is undoubtedly on a roll. The cheaper interest rate on the new loan is testament to the strength of the company’s business while the improvements it is already driving with the BwinParty business are indicative of the company’s ability when it comes to operational turnarounds.

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