888’s bankers take a haircut
Banks pay the price for 888 debt, the shares week, New York casino plans, 2023 analyst takes, startup focus – Livespins +More
Start the week with Earnings+More. On the agenda for today:
888’s latest debt dealings leave the banks nursing a loss.
Related and Caesars lay out their New York casino plans.
Deutsche Bank is positive on Macau (finally); less so Las Vegas.
Bally-sponsored RSNs suffer a writedown.
Our startup focus for this week is Livespins.
Discount orgies on the dropout buses.
888’s debt discount
According to reports, the banks who helped finance 888’s William Hill buyout have been offloading debt at a discount to get it off the books.
Short, back and sides: 888’s combined €332m bond sale and $75m term loan arrangements revealed last week was occasioned by its bankers offloading £347m of junk-rated debt, according to a report from Bloomberg.
The report suggested the debt was offered at a steep discount, with the fixed-rate portion of the bonds – €182m – being sold at 84.5¢ on the dollar and the floating rate element was sold at 87¢ on the dollar. The new term loan was sold at 85¢ on the dollar.
The report suggested the new issue premium was higher than expected.
Banks on the hook include JP Morgan, Morgan Stanley and Barclays.
Balancing act: 888 made the point that the new debt is not expected to “materially impact” the overall cost of debt, cash interest costs or leverage ratio. Note, before the debt raise 888’s net debt stood at £1.8bn and its net debt/EBITDA ratio is projected to be 5.7x at year end, falling to 4.6x in 2023.
What has changed is the company’s exposure to rising interest rates; previously 35% of the debt was on fixed rates but now that proportion has risen to 63%.
The company said in late November that exposure to floating rates and the worsening economic backdrop meant its debt leverage was “significantly above target”.
In late October, it said trading had been hit, with Q3 revenues off by 7% YoY to $484m.
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The shares week
888 managed to regain some ground later in the week as it announced its latest debt news.
Steadying the ship: 888’s shares were down over 7% midweek before managing to regain some lost ground as it announced its latest debt deal.
🛟 888’s shares regains some poise as its latest debt deal lands
Meanwhile, the news that Caesars Sportsbook had launched an NFL streaming offering via its app didn’t do much for provider Genius Sports, which saw its shares slide nearly 7% over the week.
Downstate uptime
Wynn Resorts’ partner Related Companies set out plans for its downstate casino project at Hudson Yards in Midtown.
Hard yards: The new resort would be part of a $10bn project on undeveloped land next to the Javits Convention Center. Related CEO Jeff Blau told Bloomberg it would start the second phase of the company’s $25bn Hudson Yards project.
Two of the three licenses for the casinos are expected to be awarded to MGM Resorts (Empire City, Yonkers) and Genting Malaysia (Resorts World New York City, Queens).
Roc-a-fella: Among competing bidders, Caesars Entertainment and SL Green announced that rap icon and entrepreneur Jay-Z had joined its consortium to develop a Times Square resort at 1515 Broadway, with the rapper’s Roc Nation group overseeing entertainment programming at the venue.
The Broadway League, which represents theater owners and producers, is opposed to the casino but SL Green CEO Marc Holliday said it would be a “boutique casino” of around 250k square feet and would bolster all the businesses around it.
Other groups vying for a license include Thor Equities, Saratoga Holdings, Legends and MLB Mets owner Steve Cohen with Las Vegas Sands.
The final bids will be submitted in January with a decision expected by the end of 2023.
2023 analyst takes
In a voluminous note on the sector’s prospects, the team at Deutsche Bank suggested they are broadly cautious on the year ahead.
Calling it: The headline prediction for 2023 is that Macau will finally benefit as China reopens, with investors in Wynn Resorts and Las Vegas Sands being rewarded for their patience. The team harks back to 2016/17 as being the last time that Macau-related stocks “got off the mat” and see the same pattern taking place next year.
Over at Macquarie, the team suggested short-term demand will spike ahead of the Chinese New Year. It “could be the catalyst,” they added.
The Deutsche Bank team was less positive on Las Vegas, where they are predicting GGR declines, albeit still above 2019 levels.
But despite elevated spend-per-player metrics, they still thought any domestic downturn might be offset by international visitation; in 2022, international will be ~7% below 2019 levels and DB predicted a return to parity in 2023, worth $300m in market-wide EBITDA.
Regionally, DB suggested the deterioration in personal savings and a potentially worsening employment picture clouds same-store prospects.
At JMP, the analysts noted recent commentary from other sectors of an “air pocket of softness” for the consumer during 2023.
Still, they believed operators will hold margins near current levels, with operating models now “structurally changed” vs. prior downturns.
DB said supply growth will also be an issue, with a “slew of new properties” set to open next year and plans for more developments in 2024.
Pies and prejudice: While estimating 2023 sports-betting GGR at $8.4bn, they suggested the “size of the GGR pie remains misleading” due to the continuing elevated levels of promotion, which they estimated at ~42% of LTM GGR. As promotions are curbed, they added, so GGR will “struggle to grow” on a same-store basis.
They noted that handle in more mature states is already slowing as promotional intensity subsides with evidence of a ”less euphoric consumer”.
The team suggested that as the necessary curtailing of promotions occurs, market-size projections will “trend lower”.
They added that they believe there is a “fairly compelling” argument for iCasino to be impacting sluggish land-based revenues in certain states.
Analyst takes
Online Q3 review: The team at EKG suggested the US online space is now becoming a three-horse race with the number of firms “contesting in earnest” now looking depleted following high-profile market exits.
Another trend the team identified is the pivot to casino. In recent weeks, Kindred has said it will be withdrawing from OSB-only states, starting with Iowa, in order to concentrate on iCasino.
888’s SI Sportsbook will also concentrate its fire in iCasino due to “intense competition” in sports betting.
While RSI was “talking up the potential” for an industry-wide lobbying push, EKG suggested only Indiana looks achievable on that front in 2023.
Datalines
Iowa: Casino GGR rose 1% YoY to $137.9m in November. Sports-betting GGR was down 71% YoY to $19.1m on handle that dropped 13.9% to $247.5m.
Notably, as was predicted at the time of ‘Mattress’ Mack McIngvale’s record-breaking World Series wager win, the first evidence of the extent to which the smaller books got hit has become clear. (H/T Alfonso Straffon)
Betfred’s GGR in Iowa for November came in at -$6.03m on a handle of $1.4m, while Kindred’s Unibet was even worse with negative GGR of $6.28m on a handle of less than $220k.
I’m mad as hell…
The $1.2bn writedown on the value of its Bally Sports Regional Sports Networks by Diamond Sports provides little clarity for Bally’s sports-betting operation.
… and I’m not going to take it anymore: The appointment of David Preschlack as CEO of the RSNs means parent company Sinclair Broadcast has been relieved of all day-to-day operations. Among Preschlack’s priorities will be restructuring the group’s $9bn debt.
Note, US cable TV providers have lost 31m subscribers, a third of all customers, in the last five years.
DIrect-to-consumer (DTC) streaming solutions are one option but “nearly all of those cable substitutes have slashed costs by dropping the pricey RSNs”, says Sportico.
Content light: For Bally’s there is also little clarity with regard to the RSNs driving online sports-wagering activity to its Bally Bet sportsbook. The group launched the Bally Sports+ app in the summer, but little is known about it when it comes to subscriber numbers.
From a content perspective, just five of the 14 MLB teams it has agreements with are currently streaming live games on the app.
Meanwhile on social
Unsporting trade: Confusion surrounds the situation in New Jersey where a well-known gambling Twitter personality took to the platform over the weekend to say he had been banned from using the Sporttrade betting exchange app by the company’s market access partner BallysAC.
Sporttrade confirmed to E+M the substance of the allegations contained within an episode of the Be Bettor bettors podcast.
Startup focus – Livespins
Who, what, where and when: The Malta-based Livespins was incubated by iGaming accelerator Happyhour at the end of 2020 and is led by CEO Chris Scicluna. The client list includes Relax Gaming, Yggdrasil, iSoftBet and WynnBet in the US.
Funding backgrounder: Livespins raised an unspecified amount in a Seed funding round in March this year.
The pitch: Scicluna says the Livespins product skirts recent controversies around Twitch by existing within the casino lobby, therefore offering a more controlled and responsible-gambling-friendly way of live streaming casino.
“The big opportunity starts with the players and bringing them a new era of live entertainment, where they can bet behind their favorite streamers, as opposed to just passively watching,” he adds.
“It’s a great way for operators to attract a new and increasingly significant player segment that engages with live streaming, while also being able to onboard their own brand ambassadors, influencers and streamers from their side.”
Following Twitch’s decision to ban certain casinos from its platform, Livespins has the potential to become the “platform of choice for operators, studios, streamers and of course players”, says Scicluna.
Interest has come in from operators in Asia and North America in particular. “They have progressed far more when it comes to understanding how entertainment, live streaming and gambling come together,” he says.
What will success look like? The medium term is about the “practical reality” of shipping products and gaining market access, but Scicluna says the company has not defined an exit strategy. Livespins is “on a mission to create a fantastic new live entertainment experience”. “If we can succeed in that, the rest will come,” he adds.
Newslines
More details have emerged about the sale of Leap Gaming to IMG Arena with original investor SEED Innovations, a UK-listed entity, saying the deal was worth €14m. IMG Arena was already the second-largest investor in Leap.
Red Rock Resorts has bought a 67-acre parcel of land in North Las Vegas to build a new casino property, according to a report in the Las Vegas Review Journal.
The Encore Boston Harbor is the first Massachusetts operator to be approved for a retail sports-betting license in the state. Public hearings for Caesars Sportsbook, WynnBet, BetMGM, Fanatics and Penn Interactive will be held later today, Monday.
Toronto-listed mobile live dealer tech provider Playgon has announced a C$5m convertible debenture private placement that comes with an interest rate of 10% a year which matures in two years.
The Macau authorities have announced that concessionaires will be asked to establish exclusive gaming zones for non-Chinese visitors, to help determine the amount of revenue generated by foreign passport holders.
What we’re reading
Flag of convenience: ‘Regulators need to crack down on sports gambling ads disguised as journalism’.
Calendar
Dec 13: Deal Talk #5
Dec 20: Due Diligence #2
Contact
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com