Bally’s Placed on ‘Rating Watch Negative’ by Fitch After Intralot Deal
Fitch Ratings today put Bally’s on “credit watch negative” just one day after the regional casino operator revealed a deal concerning its international interactive division.
As part of the agreement, Bally’s is merging its global digital operations with Greek lottery firm Intralot, bringing in $1.76 billion in cash to Bally’s and granting a 60% equity stake in the revamped Intralot. Although the influx of capital might support Bally's Chicago casino project and alleviate other debts, Fitch warned that the operator's B- credit rating is under threat of being downgraded if leverage stays high or if it fails to "free the Twin River property from its collateral pool."
"The company is obligated to contribute up to $450 million of additional funding to complete the Chicago project. Fitch expects the revolver to likely be used for funding, absent any potential asset sales,” notes Fitch. “The revolver matures in October 2026, introducing elevated refinancing risks.”
As of March 31, Bally’s had $135 million drawn from a $620 million revolving credit line and no obligations due until 2028, though worries about its credit quality have persisted for a while. Only three months have passed since Fitch lowered the operator's rating to B-, placing it merely one level above the highly speculative CCC category.
Analyzing Bally’s Rhode Island Circumstance
In June 2022, Bally’s and Gaming and Leisure Properties (NASDAQ:GLPI) revealed a deal where the casino landlord purchased the property assets of Bally’s Tiverton Casino & Hotel in Rhode Island, including options to acquire the real estate of the operator’s additional gaming location in Rhode Island — Bally’s Twin River Lincoln Casino Resort.
According to the agreement, the real estate investment trust (REIT) has the option to purchase the Twin River venue by September 30, 2026, but Bally's must obtain consent from creditors or refinance its credit facility for the deal to move forward.
“Starting Oct. 1, 2026, GLPI can purchase the property even if Bally’s has not obtained consents or refinanced,” adds Fitch. “The agreed sale price is $735 million, and GLPI will receive an annual rent payment of approximately $58.8 million with escalators. While the sale proceeds could ease Bally’s Chicago contribution burden, the covenant resolution remains uncertain.”
Completing that transaction is crucial to Fitch’s ratings outlook on Bally’s, and if obstacles arise regarding that deal, the seller’s financial flexibility might be constrained, possibly leading to a ratings downgrade.
Additional Elements Influencing Bally's Credit Rating
Fitch suggests that Bally’s might achieve a ratings upgrade by reducing its earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) leverage to under 6x and increasing its EBITDAR fixed charge coverage ratio over 1.5x, along with addressing funding obligations linked to the Chicago integrated resort.
On the other hand, the operator may be further downgraded into junk status if its EBITDAR leverage surpasses 7x and its fixed charge coverage ratio falls below 1x. Fitch described Bally's domestic interactive segment as a laggard, suggesting that this unit is not expected to enhance the credit profile in the short term
“Although the U.S. interactive business benefits the company’s product diversification, Fitch does not expect it to be a material credit driver in the near to medium term,” according to the research firm. “Bally’s is currently generating negative EBITDA in the segment, and Fitch remains uncertain as to how long it will take to achieve profitability given the number and intensity of its competitors.”
