Flutter Entertainment (NYSE: FLUT) announced it has refinanced a $3.885 billion term loan originally issued to the gaming firm in November 2023.
The action taken by the parent firm of FanDuel — the leading online sportsbook provider in the US — leads to a reduced interest rate and savings on yearly interest costs.
"The repricing reduces the applicable interest rate on the Term Loan by 25 basis points from Secured Overnight Financing Rate (SOFR) plus 2.00% to SOFR plus 1.75%. Flutter’s proactive action is expected to result in an interest expense saving of approximately $10 million annually,” according to a press release issued by the Dublin-based company.
Thirteen months ago, when the term loan was released, Flutter utilized it to refinance existing debt, extending its maturity periods to 2028 and 2030. Fitch Ratings assigned a “BBB” rating to the loan, and the previously mentioned refinancing does not lead to changes in the 2030 maturity date.
The Importance of Flutter Refinancing
As mentioned previously, the adjustment of the term loan allows Flutter to save $10 million annually on interest costs, and although this may seem minor for a company valued at $46.53 billion, the savings could be invested in areas that generate value for the business.
The refinancing indicates to investors that the gaming company is capitalizing on lower interest rates while focusing on strengthening its balance sheet.
“At September 30, 2024, the Group’s leverage ratio was 2.4x, based on the last 12 months Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), a reduction of 0.7x from 3.1x at December 31, 2023 due to growth in the Group’s Adjusted EBITDA. The Group is now within its medium-term leverage target of 2.0-2.5x,” said Flutter when it released third-quarter results last month.
The parent company of Betfair might also utilize a portion of the interest savings to fund its recently revealed share buyback initiative or to maintain its track record of beneficial acquisitions.
Flutter Credit Profile Strong
The leading ratings agencies assess Flutter as being one step into investment-grade territory or one tier below that ranking, suggesting that the operator's credit profile is good with significant potential for enhancements. Earlier this week, Fitch Ratings confirmed its “BBB-“ rating and “stable” outlook for the parent company of FanDuel.
The research company highlighted Flutter's ability to generate free cash flow and its dedication to decreasing leverage as some of the reasons for its positive perspective.
“The Stable Outlook reflects Fitch’s expectation of Flutter’s leverage staying within its rating sensitivities, despite a recently announced sizeable share repurchase programme and acquisitions in Italy and Brazil. This is because we expect US operating profitability to continually improve, which would support growth in the group’s EBITDA and free cash flow (FCF) over the medium term,” noted Fitch.
The ratings agency mentioned that Flutter is expected to achieve “low double-digit revenue growth in 2025” as EBITDA margins rise to 20% by 2027.
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