Leading gaming provider and games publisher, Aristocrat Leisure Limited (ASX: ALL) has announced to have successfully priced a new US$ 500 million Term Loan B (TLB) facility, which is due to mature in October 2024, further strengthening the Group’s liquidity position and preserving its strong balance sheet metrics.
The Company develops and commercialises a diverse range of products and services including electronic gaming machines, casino management systems, and digital social games, with its land-based products approved for use in more than 300 licensed jurisdictions across more than 80 countries.
Aristocrat’s Term Loan B Facility Details
The loan was priced on Thursday 14 May 2020 (US time) and settlement is expected to occur on or around 21 May 2020 (US time). The proceeds from this transaction have been indicated to be directed towards general corporate purposes. The issue received a strong support from the existing and new investors and was priced with a margin of 375 basis points. Following the settlement, Aristocrat’s total TLB debt will amount to US$ 2.35 billion priced at a weighted average LIBOR + 218 bps.
"We are very pleased with the outcome of this debt raising which was significantly oversubscribed. The TLB market continues to provide Aristocrat with flexibility and competitively priced debt on a covenant light basis and we are grateful for the ongoing support of this important debt market. The transaction is part of our ongoing strategy to further enhance our liquidity, continue to invest for growth and position the Group to emerge strongly from the current COVID-19 related challenges."
said Julie Cameron-Doe, Chief Financial Officer, Aristocrat.
Through scaling back its capital expenditure, Aristocrat Leisure has been able to position itself with strong balance sheet metrics during the current market slowdown.
Having a good liquidity is imperative for all businesses to endure the ongoing economic downturn caused by the coronavirus pandemic. Particularly, sectors like hospitality, entertainment and aviation have been impacted intensely and getting through these crises, for both people and businesses, requires resilience, innovation, strong cash position as well as long-term orientation.
Aristocrat’s COVID-19 Response
Through this challenging period of the pandemic, the Group’s first priority has been the health and wellbeing of staff, families, customers and suppliers. Over 99% of Aristocrat’s global workforce has been working from home. Moreover, since mid-March 2020, almost all of Aristocrat’s land-based global customer base have suspended operations and re-openings are being planned in phases, through a gradual ramping up of gaming floors based on improvements in consumer confidence and gradual lifting of social distancing and travel limitations by the country authorities over time.
It is noteworthy that over the financial year to 30 September 2019, Aristocrat derived approximately 40% of total Group revenues from the digital business, which has continued to perform strongly over recent months too, with higher bookings and player engagement evident across most of the portfolio.
In addition to maximising opportunities within the digital space, Aristocrat has continued to focus on all areas within its control in responding to the crisis, including implementation of comprehensive risk management and mitigation plans, and reduction in costs via a range of prudent Group-wide cost reduction initiatives. These initiatives include elimination of discretionary, consultant and contractor expenses in accord with the Company’s new priorities as well as general hiring freeze.
More than 70% of Aristocrat’s operating expenses are associated with people costs, thus, significant workforce changes have been made effective across a staff of ~ 4,000 (representing all non-Digital teams) from 1 May 2020, as follows:
- Around 1,000 staff would stand down until the end of June 2020, principally in land-based sales, service and manufacturing operations, reflecting venue closures and uncertain reopening timeframes; and
- Around 200 roles would be eliminated permanently from the business, reflecting urgent changes in priorities.
Furthermore, the Company indicated that by end of September 2020, ~ 200 full time roles would move to part time, salaries of 1500 staff to be cut by 10 – 20%; fees payable to Aristocrat’s Board of Directors will be reduced by 20%; and the base salary of Aristocrat’s Managing Director & CEO, Trevor Croker, will be reduced by 30%, upon common consensus.
To further strengthen its liquidity for a smooth post COVID-19 recovery, the Company Directors also decided to suspend the progressive dividend policy with no intention to declare an interim dividend as part of the Group’s half-year results planned to be released on 21 May 2020. What adds to Aristocrat’s strength and flexibility is the diversity of its operations.
Aristocrat Leisure has also been eligible to access government’s JobKeeper employment subsidy program in Australia and is working to apply this benefit to protect as many jobs as possible and position the business to respond quickly as land-based demand returns. At the same time, the Company is actively checking for its eligibility for other government programs and stimulus packages released in the United States, or elsewhere across its global operations.
In total, the Company’s cost reduction initiatives are expected to deliver approximately $ 100 million in identified savings over the remainder of the financial year ending 30 September 2020. On top of that, the Group’s outstanding fundamentals continue to underpin its recovery plans and long-term confidence with a conservatively geared balance sheet, a net debt to EBITDA ratio of 1.4x, as at 30 September 2019, no near-term debt refinancing requirements, ~its $ 286 million in revolving credit facility maturing in July 2024 and US$ 1.85 billion term loan facility maturing October 2024.
ALL stock closed the trading on 18 May 2020 at AU$ 25.880, up 2.62% with a market capitalisation of ~ AU$ 16.1 billion.
(Note: All dollar values are in Australian dollars, unless otherwise stated)