Posted on: April 20, 2023, 02:28h.
Last updated on: April 20, 2023, 02:28h.
Gaming technology provider GAN Ltd. (NASDAQ:GAN) landed much needed refinancing with some creditors — moves that will enable the battered firm to realize significant savings on annual interest expenses.
GAN creditor Beach Point Capital is waiving certain defaults and covenants under its current agreement with the tech company. The lender is replacing an interest coverage ratio with a $10 million liquidity agreement, which will be tested on a quarterly basis.
Sega Sammy Holdings will enter an assignment and acceptance agreement with Beach Point, making it the new creditor on the term loan, in addition to lending to GAN an additional $12m to pay certain fees to Beach Point and for general corporate purposes,” wrote Macquarie analyst Chad Beynon in a note to clients today.
He also pointed out that Sega Sammy will pare the interest rate on GAN’s term loans to 8% from 14%, creating $2 million in annual savings on interest expenses.
Why It Matters
Formerly GameAccount Network, the company provides software-as-a-service (SaaS) solutions for iGaming and sportsbook operators.
GAN went public in the US nearly three years ago and while there was initial enthusiasm for the stock, that’s long since evaporate as the shares are down 64.68% over the past year. In early 2021, the stock flirted with $32. Today, it labors around $1.60. Following that run, investors will welcome any good news and the credit agreements could help.
“More importantly, we view this new agreement positively, as it removes liquidity and covenant concerns, which we believe were an overhang on the stock recently, and potentially indicates a new strategic partner in Sega Sammy going forward,” added Beynon.
The analyst has an “outperform” rating on GAN with a 12-month price target of $5, meaning the shares would need to more than triple from current levels to get there.
GAN Credit Moves Could Help Strategic Review
Earlier this year, Ireland-based GAN announced it is initiating a strategic review “to evaluate options available to hasten our path to better profitability metrics and a more attractive return profile.”
It remains to be seen if that results in asset divestments or an outright sale of the company, but GAN’s market capitalization of $73.18 million makes it easily digestible for any number of prospective suitors. Macquarie’s Beynon observed the aforementioned refinancing moves could spur the company’s strategic review process and the stock is deeply discounted.
“Moreover, we view the deal as a key first step towards a potential asset sale. As a reminder, GAN announced the initiation of a strategic review process during 4Q earnings,” concluded the analyst. “At ~$70m market cap, we believe there is value in recent contracts, embedded tech, the B2C business (following recent write-downs) and iGaming exposure. However, ongoing delays/reductions to the company’s revenue and EBITDA goals have caused shares to languish at well under 1x EV/sales.”