Date: 08.05.2024

by Adam Dworak

888 Holdings Refinances Debt, Eyes Deleveraging Amidst Growth Plans

888 Holdings, a prominent retail and online gaming operator, recently announced a significant step towards strengthening its financial position through successful debt refinancing.

888 Provides Trading Update and FY23 Guidance with Focus on Long-Term Growth iGamingExpress

This move comes amidst the company’s strategic efforts to manage its debt load and pursue growth opportunities in the dynamic iGaming industry.

Refinancing Details

The company has successfully priced a £400m senior secured note offering at 10.75%, set to be issued on 9 May. Additionally, 888 has secured an additional revolving £50m multi-currency credit facility, with a maturity date of 31 December. These measures are expected to reduce the company’s net debt by approximately £18m upon completion, reflecting discounted cash compensation received upfront to cover future increased interest costs.

However, it’s noteworthy that the refinancing will lead to an increase in cash interest payments by £4m-£5m annually until 2028. Moreover, the £400m portion of the debt will now be due in 2030, instead of the previous maturity date of 2028.

Despite these adjustments, the operator anticipates an improved currency mix of its debt, closely aligning with the firm’s cash generation capabilities. Additionally, there’s a positive shift towards a better-fixed versus floating debt mix.

888’s Deleveraging Journey

The decision to refinance debt underscores 888’s proactive approach to address financial challenges. The company accumulated significant debt during its £1.95bn acquisition of high-street betting brand William Hill’s non-US assets in July 2022. With rising interest rates, servicing these obligations became challenging, prompting the company to initiate the debt restructuring process in 2022.

As of 31 December 2023, 888’s net debt stood at £1.72bn, representing a 5.6x debt/EBITDA ratio. To alleviate financial strain, the company has suspended dividend payments until the debt level aligns with its mid-term target of 3x leverage. In its March investor presentation, 888 outlined its intention to achieve a 3.5x leverage ratio by 2026, albeit one year delayed from the initial target set in 2022.

CEO Perspective

888 CEO Per Widerström emphasized the company’s commitment to financial discipline and capital allocation strategies aimed at reducing leverage. He believes that while the financial leverage may be relatively high in the industry context, it will serve as a significant positive driver of return on equity in the coming years.

Widerström highlighted 888’s strong cash generative capabilities, which will be utilized wisely to ensure profitable growth and deleveraging, ultimately maximizing return on equity.

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