IGT Signs New Credit Facility - Analyst Blog
20 4월 2011 - 2:39AM
Zacks
A leading global designer, developer and manufacturer of gaming
machines and systems products, International Game
Technology (IGT) signed a new five-year credit facility
with a syndicate of banks worth $750.0 million.
The credit facility replaces IGT’s existing facility of $1.24
billion. It also carries a lower interest rate than the existing
one. As of April 14, 2011, there were no outstanding borrowings
under the existing credit facility.
Initially, IGT will be charged a rate equal to LIBOR plus 122.5
basis points on borrowings and facility fee equal to 27.5 basis
points, at the Baa2/BBB pricing level.
Later, the facility fee and interest rate will be adjusted
according to IGT’s debt rating of senior unsecured debt or Net
Funded Debt to EBITDA, whichever is more favorable to the
company.
IGT expects to extend the size of the credit facility by $250.0
million during its five-year tenure.
Premier Banks including Wells Fargo Securities, a division of
Wells Fargo & Company (WFC) and RBS Securities
Inc. of Royal Bank of Scotland Group plc (RBC)
acted as Joint Lead Arrangers and Joint Book Runners for the
transaction.
IGT’s balance sheet remains highly leveraged. As of December 31,
2010, long-term debt was $1.57 billion versus $1.67 billion in the
prior quarter. Debt-to-total capital ratio was 40.0%.
With a net debt position (debt less cash) of $4.40 per share,
the investment risk remains high for the company.
We believe substantial indebtedness and higher cost of borrowing
may limit the company’s ability to raise funds going forward.
As a result of high debt, IGT curtailed its share repurchase
program in 2009 and 2010; although it continues to have 7.7 million
shares under the existing share repurchase authorization.
Recommendation
We maintain our Neutral rating over the long term (6-12 months).
We believe IGT is focused on reducing its dependence on the
domestic machine replacement cycle.
We consider this a prudent strategy for bringing consistency to
its top-line growth and increasing earnings visibility going
forward. The current product pipeline reflects strong growth
expectations from non-machine revenues in systems; intellectual
property and new games/software.
However, top-line growth remains elusive and we believe that
lack of visibility in replacement sales, very few new openings,
higher debt levels and increasing competition, especially from
Scientific Games Corp. (SGMS) will remain primary
growth headwinds for 2011.
Currently, International Game Technology has a Zacks #3 Rank,
which implies a Hold rating on a short-term basis.
INTL GAME TECH (IGT): Free Stock Analysis Report
REGAL BELOIT (RBC): Free Stock Analysis Report
SCIENTIFIC GAME (SGMS): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
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