Everi Holdings (NYSE:EVRI) is reportedly joining a growing list of gaming companies in asking lenders to amend debt covenant ratio agreements in an effort to gain some financial wiggle room amid a zero- revenue outlook for casino operators.
Shares of the gaming software and payment processing provider surged following a report by Bloomberg indicating the Las Vegas-based company is pursuing talks with creditors. Everi stock, which entered Tuesday with a year-to-date loss of nearly 70 percent, jumped nearly eight percent on volume that was nearly 50 above the daily average today.
The company is asking for amendments to its credit agreements, including changes to the waiver on its maximum consolidated secured leverage ratio for the periods ending June 30, September 30, and December 31,” according to Seeking Alpha.
With casino operators – Everi’s core clientele – grappling with coronavirus-forced closures all over the world, several are approaching lenders seeking more flexibility on debt amendments to avert default, should the current zero-revenue climate last longer than anticipated. Recently, the standard request has been for a gaming company borrower to ask creditors to liberalize consolidated leverage and interest coverage ratios.
News of Everi possibly asking banks to relax covenant amends emerges just days after Fitch Ratings downgraded its grade on the company’s debt to ‘B’ from ‘B+’ with a “negative” outlook.
The credit rater cited concerns that Everi’s leverage could spike this year, potentially explaining why the company is seeking loosening of its secured leverage ratio. At the end of last year, Everi’s debt-to-equity ratio – a measure of a company’s leveraged divided by shareholder equity – was 20.52x.
The company had net debt of $1.1 billion at the end of 2019 and available cash of $161 million, according to its fourth-quarter earnings statement. Last month, Everi said it drew on a $35 million bank credit revolver to bolster its liquidity position.
The earliest maturity on the firm’s debt is May 2024, comprised of $749 million of senior secured term loans followed by $375 million in senior unsecured notes coming due in December 2025, a spokesman for Everi told Casino.org. He declined to comment on the Bloomberg article.
Trying to Stay Afloat
Everi is taking other steps to shore up its balance sheet and cut costs, as the gambling industry awaits a return to business as usual.
Last month, it was revealed that CEO Michael Rumbolz will take no salary this year, and other high-ranking executives will undergo dramatic pay reductions. Combined with what the company called “targeted furloughs,” Everi said future payroll obligations could decline to less than $2 million a month.
Other gaming companies that have approached lenders about loosening covenant ratios include Sands China and MGM China. Additionally, there is speculation Wynn Resorts or its Wynn Macau unit could do the same.