Bally’s (NYSE: BALY) investors are worried about the company’s financial situation. Securing funding for a casino project in the Bronx, NY could help alleviate those concerns.
In a recent regulatory filing, the regional casino operator expressed “substantial doubt” about its ability to continue operating, leading to a sell-off in the stock. Analysts and investors are emphasizing the importance of securing financing for the $4 billion New York casino project. Truist Securities analyst Barry Jonas highlights the significance of Bally’s efforts in New York.
“This (the going concern language) may be resolved soon as BALY pursues financing for its NY project, but it is not a good look and is rarely seen across our coverage,” observes the analyst. “Depending on terms, a resolution could drive some recovery following the sell-off, but we remain Hold-rated given ongoing liquidity, project delays, and international risks.”
Rhode Island-based Bally’s has already allocated $800 million to the Bronx project, but construction has not yet begun. However, additional funding of at least $500 million is needed to move forward with the project.
Bally’s Exploring Financing Options
Analysts have expressed concerns about Bally’s acquisition strategies and financing needs. Despite its junk rating, the company has been successful in raising capital when required. Currently, the operator is seeking to strengthen its Bronx plans by exploring financing options.
“Management reiterated a 2030 opening date for its Bronx development, noting that they are actively raising additional capital for construction,” adds Jonas. “In July, a non-binding term sheet for a pre-construction loan was signed, and the company entered into a letter of intent (LOI) with a potential equity investor in August. We have in the past noted sizable investor interest in the Bronx project and think once completed financing for NY could help remove the ‘going concern’ language in the financials.”
Recent discussions among analysts have centered on Bally’s financing options, including equity and asset sales or debt financing.
Earlier this year, Gaming and Leisure Properties (NASDAQ: GLPI) — Bally’s primary landlord — expressed interest in the Bronx integrated resort. However, it is unlikely to be the majority financier for the operator’s largest project to date.
Speaking of GLPI…
Bally’s accounts for 19% of Gaming and Leisure’s cash rent. Despite concerns, analyst Barry Jonas remains optimistic about the real estate investment trust’s prospects, suggesting that other reputable operators may step in if Bally’s abandons its Chicago project.
“Four wall rent coverage is over 2x for the two master leases suggesting the properties can sustain GLPI’s current rent in the event of property sales or parent bankruptcy,” notes the analyst. “If BALY’s Chicago project ultimately fails, we continue to believe there are other reputable operators willing to step in to manage the property.”
Bally’s has reiterated its commitment to the Chicago project, reassuring the city and investors despite the going concern language in the regulatory filing.