September 16, 2024 13:40 GMT
Playtech (PTECLN Secured; Ba2/BB CW Neg) 28s rally on a few updates
CONSUMER CYCLICALS
Playtech is facing a couple of headlines today;
- Sky reporting Flutter is closing in on a £2b purchase of the consumer arm, Snaitech
- Long-standing resolution with Mexican partner Caliplay including receiving €150m or more than 80% of unpaid fees that were due from it. Moody's was already expecting a resolution by year-end, S&P should come off CW neg. on the update.
- Trading update which said FY24 EBITDA will be "slightly ahead of current consensus expectations" - mainly on B2B division (i.e. not the tabled for sale B2C segment). Consensus for group was at €445m (+9.3% yoy) and B2B at €190 (+4.4% yoy).
- BS is clean with net €370m/gross €730m in debt to leave it 1.2x/1.7x levered (note it reports lower as it excludes the €90m in leases). It will need to pay down €425m/£360m in debt to keep gross at 1.7x- not a hard ask on £2b in proceeds. The 26s are par callable now - mids are there.
- Re the financials of remaining co/B2B segment; a tad higher margin than consumer (25-27% vs. 24%) and was growing similar MSD.
- Ratings seem to mostly reflect the fact that 30% of B2B division is under structured agreements/JVs (like Caliplay above) and the lack of guaranteed benefits to bondholders from a cash windfall if those partners exercise buy-out rights on the JVs. All else equal, sale of consumer will only increase the exposure to that.
- 1H results come in 2 weeks (30th) in London pre-market.
28s are +0.7pts today pricing to worst at a 2.75yr call/4.6%/OAS+173. Note it is callable starting in 9months at €102.94 (mids €103.4) - i.e. short duration line. No firm view given unclear what co will do with cash proceeds. If it takes out the €350m 26s (looks likely) then BS will be on a net cash position - and if it goes acquisitive from there/ is willing to push BS leverage back up we could see supply - it may shift to worst ratings on that (Smaller scale and Moody's seems to not like the B2B division on the JV structures and high customer concentration).
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