William Hill saw its credit rating lowered further into non-investment grade territory. Moody’s Investors Service downgraded the British bookmaker to Ba3 from Ba1, while placing the company on review for additional reductions.
UK-based sportsbook operators Flutter Entertainment, GVC Plc, and William Hill are forecasting substantial losses this year, as marquee leagues and sporting events around the world are canceled or postponed because of the coronavirus. In Europe, the bookmakers were already reeling from the rescheduling of the UEFA Euro 2020 tournament to 2021 when reports surfaced this week that golf’s Open Championship and Wimbledon could be delayed or be scrapped altogether this year.
The gaming sector has been one of the sectors most significantly affected by the shock, given its sensitivity to retail gaming shop closures and the cancellation of sports events,” said Moody’s in a note obtained by Casino.org. “More specifically, the weaknesses in William Hill’s credit profile have left it vulnerable to revenue losses in these unprecedented operating conditions, and the company remains vulnerable to the outbreak for as long as the current lockdowns and cancellations continue.”
William Hill’s rating of Ba3 is the lowest in Moody’s Ba spectrum and implies “speculative elements” with “substantial credit risk.”
As an avenue for conserving cash against the COVID-19 backdrop, William Hill recently said it won’t pay a 2019 dividend, joining gaming companies from around the world, including Wynn Macau and Boyd Gaming (NYSE:BYD), in scrapping payouts.
The UK-based operator has some other levers to pull should it need additional liquidity, including a $493 million credit revolver. But Moody’s expects William Hill’s leverage to increase as result of lost revenue stemming from the coronavirus.
“Moody’s expects the impact of coronavirus to further drive Moody’s-adjusted leverage above 6x in 2020, exceeding the previous downgrade trigger of 3.5x, not including any drawings under the company’s revolving credit facility (RCF),” said the ratings firm. “Liquidity has deteriorated, with the upcoming GBP203 million bond maturity in June and a high level of cash burn since the sporting event cancellations and licensed betting office (LBO) closures began.”
Other Factors to Consider
William Hill derived 53 percent of its 2019 revenue from sports betting. But over three-quarters of that turnover was generated in its home market of the UK, underscoring vulnerabilities at a time when major European soccer leagues are postponed and the Open Championship and Wimbledon, among other events, are at risk because of COVID-19.
On a longer-term basis, the company’s dependence on the UK is declining because of its growing presence in the fast-growing US sports wagering market and acquisitions that bolstered its footprint in other parts of Europe.
“The Ba3 rating benefits from the company’s (1) relatively strong positions in the UK retail betting industry; (2) significant opportunity for online growth in Europe through MRG and in North America as the number of US states to legalize sports betting grows; (3) strong brand name and the retail segment’s high barriers to entry,” according to Moody’s.