Business Context and Reporting Period
Bally’s Corporation filed this Form 8-K on October 7, 2021, reporting events occurring primarily on October 1, 2021. Bally’s completed its previously announced acquisition of Gamesys Group plc, expanding its interactive gaming business and assuming Gamesys as a subsidiary.
Key Financial and Capital Structure Information
- Gamesys shareholders received an aggregate of 9,773,537 Bally’s common shares and approximately £1.544 billion in cash.
- Bally’s assumed issuer obligations for two senior note series: $750 million of 5.625% senior notes due 2029 and $750 million of 5.875% senior notes due 2031.
- Bally’s and subsidiaries entered into senior secured financing of up to $2.565 billion, comprising a $1.945 billion term loan maturing in 2028 and a $620 million revolving credit facility maturing in 2026.
- The revolving credit facility was undrawn at closing, although the filing does not provide the amount drawn on the term loan or total post-closing debt outstanding.
- Credit facility borrowings bear interest at either a LIBOR-based or base rate plus an applicable margin. The filing does not provide the applicable margin.
- The revolving facility carries a quarterly commitment fee of 0.50% or 0.375%, based on Bally’s total net leverage ratio.
- The filing text does not provide consolidated revenue, profit, cash flow, margins, liquidity balances, or other operating performance metrics for the reporting period.
Material Changes Versus the Prior Comparable Period
- The Gamesys acquisition was completed, adding Gamesys’ operations and resulting in the issuance of Bally’s shares and substantial cash consideration.
- Bally’s assumed $1.5 billion of senior notes and established a new senior secured credit facility with up to $2.565 billion of commitments.
- Lee Fenton, formerly Gamesys’ chief executive officer, became Bally’s chief executive officer and joined the board.
- Robeson Reeves became President, Interactive, while George Papanier became President, Retail.
- Jim Ryan, a non-executive Gamesys director, joined Bally’s board.
- Bally’s amended its bylaws to increase the board size to nine directors.
Guidance, Outlook, Risks, and Unusual Items
- The filing does not provide financial guidance or quantified operating outlook.
- The credit agreement restricts additional indebtedness, dividends and other restricted payments, asset sales, investments, and liens, subject to specified exceptions.
- A maximum first-lien net leverage covenant applies to the revolving facility when borrowings exceed 30% of total revolving commitments.
- The credit facilities are guaranteed by restricted subsidiaries and secured by first-priority liens on substantially all assets of Bally’s and the guarantors, subject to exceptions.
- The financing terms expose Bally’s to interest-rate risk because borrowings may bear variable LIBOR- or base-rate-based interest.
- Lee Fenton received a $7.5 million equity award, consisting equally of restricted stock units and performance stock units, vesting ratably over three years. His annual base salary is $1.1 million, with a target bonus opportunity equal to 100% of base salary, payable in British pounds.
- The Gamesys acquisition shares were issued in reliance on the Section 3(a)(10) exemption from Securities Act registration.
Investor Verification Items
- Review the filed Gamesys interim financial statements and pro forma combined financial statements for the six months ended June 30, 2021 and related historical periods.
- Verify the final amount drawn under the $1.945 billion term loan and Bally’s total debt, cash, and liquidity following closing.
- Review the credit agreement for interest-rate margins, amortization, mandatory prepayments, covenant thresholds, collateral, and default provisions.
- Assess the acquisition’s effect on revenue, profitability, cash flow, leverage, and share count using subsequent quarterly filings.
- Evaluate integration, regulatory, online gaming, interest-rate, foreign currency, and leverage risks associated with combining Bally’s and Gamesys.