23rd Apr 2019 18:44
LONDON (Alliance News) - Moody's Investor Service assigned a Ba1 rating to William Hill PLC's GBP350 million senior unsecured notes due 2026.
Moody's added the company's Ba1 corporate family rating, Ba1-PD probability of default rating,
and Ba1 rating on existing notes remained unchanged, while the bookmaker's outlook remained negative.
The credit ratings agency said William Hill is "constrained" by several issues, resulting in the Ba1 rating.
William Hill's "adverse regulatory change" was a leading rationale for the rating, with Moody's noting in particular the Triennial Review outcome which will reduce maximum stakes on fixed odds betting terminal machines to GBP2 from GBP100. Moody's said this "substantially reduces revenue from gaming machines and potentially reducing total operating profit by GBP70 million to GBP100 million or more".
As a result of this change, Moody's expects a "temporary spike in leverage".
The FTSE 250 constituent's "limited geographic diversity" was also noted for the Ba1 rating. Moody's, however, said this was improving due to US and European expansion.
Moody's also said William Hill's "mature land-based retail business" offers "limited growth potential and volatile sports results".
The rating benefits from the company's "leadership position in the UK retail betting industry and in the growing UK online betting and gaming segments".
The rating was boosted by William Hill's "significant opportunity" for growth in Europe and the US, said Moody's. William Hill's "strong brand name" and the industry's "high barriers to entry" also aided the rating.
Moody's noted William Hill's liquidity profile is "good", with unrestricted cash balances of GBP420.8 million at the beginning of 2019 and a fully available GBP390 million revolving credit facility.
Moody's added: "The outlook would likely be stabilized if the company continues to perform well in its online and sports-betting segments, and continues to diversify geographically outside of the UK, particularly in the US and Europe. Additionally, Moody's will require greater clarity that there are no likely further adverse regulatory measures in the near term and that the implementation of the Triennial Review decision can be managed in such way that the company is likely to stay within the credit metrics commensurate within its current rating category."
Shares in William Hill closed down 0.1% Tuesday at 167.10 pence each.
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