GVC excites M&A chatter with debt deal

GVC excites M&A chatter with debt deal

Monday, March 6, 2017 Posted by Scott Longley
Term loan cuts cost of long-term debt

There was excited speculation regarding potential the future M&A intentions of GVC late last week when it announced a new debt deal that seemed to offer the company further debt firepower should it spot any potential opportunities.

The new long-term financing represents GVC’s first foray into syndicated loans and is seen as further endorsing the gaming company’s credentials with the banks. A term loan of €250m and additional €70m revolver will pay off a loan from Nomura arranged only last October. That loan itself was taken out to partly pay off more expensive €400m loan from Cerberus that was utilised to part-pay the BwinParty acquisition.

The price of the debt now on GVC’s books has fallen from the 13 percent high of the Cerberus loan to 3.25 percent above the benchmark interest rate for Euro-denominated transactions.

The company said the syndicated loan facility, led once again by Nomura, was significantly oversubscribed. The Bank of Ireland, the London branch of Deutsche Bank and leading Italian investment bank Mediobanca also subscribed.

GVC said the €250m was an ‘accordion’ facility that could be extended to as much as 2.5 times the EBITDA at the time in order to pursue any acceptable buyout opportunities. Notably the revolving debt facility remains undrawn.

Excitable investors were initially prompted to bid up GVC shares on comments from GVC chief executive Kenny Alexander that “access to a broader debt investor base is important given the ongoing consolidation in the gaming industry, particularly given the Group's proven track record of successful M&A.”

However, the shares fell back again slightly at the end of the week to finish at 684p.

Analysts at Goodbody in Dublin were nevertheless enthused about the potential for GVC to embark on more acquisition activity. “The accordion facility gives the group some additional capacity if further M&A opportunities arise,” the analysts said in a note to clients.

Simon French, analyst at Cenkos, agreed that the debt deal represented a “significant development” and that it further enhances GVC’s claims to be a “major player with a proven track record in the global gaming market which is undergoing rapid consolidation.”

Within the past few weeks, further evidence of an increase pace of M&A has come with Kindred Group’s buyout of GVC, Betsson has acquired UK-based NetPlay and the Spanish concern Premier Casino and LeoVegas has bought up Italian-licensed operator Winga.it.

Totally Gaming says: You would likely get very short odds on GVC making a further acquisition this year. As the newsflow would suggest, the pace of acquisitions in the space is not slowing down and while the debt is cheap - and in GVC’s case getting cheaper - there is no reason to suspect this particularly merry-go-round is anywhere near slowing down. The key as ever with any buyout is what the terms term execution risk, and with GVC the record in that regard looks to be as good as anyone’s.

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