The leading ratings agency, Fitch Ratings, announced a new downgrade, affecting Bally’s Corporation. This marked another downgrade for the company recently, which has now seen action from three rating agencies, Fitch included. On Monday, Fitch Ratings said that it downgraded the company’s Issuer Default Rating (IDR) from “B+” to “B.”
Additionally, the company said it downgraded Bally’s Corporation’s senior secured term loan from “BB+”/”RR1” to “BB”/”RR1,” along with unsecured notes from “B”/”RR6” to “CCC+”/”RR6.” The ratings agency said that the rating outlook for the company is negative, presenting a number of factors that affected the latest action.
The latest downgrade is attributed to elevated leverage which exceeds Fitch’s sensitivities, said the rating firm, adding that Bally’s has seen prolonged high leverage expectations. Another key factor for the downgrade was development and financing risks related to the gaming operator’s project in Chicago in addition to other potential development challenges.
The ongoing EBITDA pressure for Bally’s Corporation’s Interactive segment in North America also played a role in the latest downgrade. On the bright side, Fitch said that the downgrade is offset by the gaming operator’s “diverse portfolio of regional gaming properties, the stable International Interactive business, an expected reduction in losses in the North America Interactive business and adequate liquidity.”
“The downgrade reflects the relatively high leverage that is above Fitch’s rating downgrade sensitivities and are now expected to be higher for longer; execution risk in the financing and development of the Chicago development; as well as other potential development opportunities, and continued drag on EBITDA at the North America Interactive segment,“
reads a statement released by Fitch Ratings
A Busy Period for Bally’s
Bally’s ambitious project in Chicago involves an investment of $1.3 billion. This development, Fitch said, “will likely lead to medium-term elevated consolidated leverage metrics through 2026, with gross consolidated adjusted leverage likely remaining outside of Fitch’s sensitivities during construction.”
As noted, the rating company acknowledged the gaming operator’s strong diversification efforts. Currently, Bally’s is developing or operating 16 properties within 10 US states. Besides a strong land-based presence, the gaming and entertainment operator has a leadership position within the international interactive vertical with a strong footprint in the UK.
Last month, Standard General, a company that holds a 23% stake in Bally’s, announced a bid to acquire the outstanding shares in the company. The bid was $15 per share, which was a 41% premium to the stock price of the company’s shares trading on March 11.
Besides Fitch, late last month, another research firm confirmed a downgrade for Bally’s rating. The move came from Moody’s Investors Service with the company confirming it downgraded Bally’s from “B1” to “B2”, changing the outlook from “stable” to “negative.”