Flutter Entertainment Refinances Loan, Cuts Interest Expenses

• Gambling News
• 20 December 2024

Flutter Entertainment (NYSE: FLUT) announced that it has refinanced a $3.885 billion term loan that was issued to the gaming firm in November 2023. 

The action taken by FanDuel's parent company — the biggest online sportsbook operator in the US — leads to a reduced interest rate and savings on yearly interest costs.

"The repricing reduces the applicable interest rate on the Term Loan by 25 basis points from Secured Overnight Financing Rate (SOFR) plus 2.00% to SOFR plus 1.75%. Flutter’s proactive action is expected to result in an interest expense saving of approximately $10 million annually,” according to a press release issued by the Dublin-based company.

Thirteen months ago, when the term loan was issued, Flutter utilized it to refinance other debts, extending its maturity periods to between 2028 and 2030. Fitch Ratings assigned a “BBB” rating to the loan, and the refinancing mentioned earlier does not lead to changes in the 2030 maturity date. 

The Importance of Flutter Refinancing 

As previously mentioned, the adjustment of the term loan allows Flutter to reduce interest costs by $10 million annually, and although this might seem minor for a company valued at $46.53 billion, the savings could be utilized in areas that create value for the business. 

The refinancing indicates to investors that the gaming firm is leveraging decreasing interest rates while focusing on strengthening its balance sheet. 

“At September 30, 2024, the Group’s leverage ratio was 2.4x, based on the last 12 months Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), a reduction of 0.7x from 3.1x at December 31, 2023 due to growth in the Group’s Adjusted EBITDA. The Group is now within its medium-term leverage target of 2.0-2.5x,” said Flutter when it released third-quarter results last month.

The Betfair parent might utilize some of the interest savings to bolster its newly unveiled share buyback initiative or to maintain its track record of value-adding acquisitions. 

Flutter Credit Profile Strong 

The leading ratings agencies assess Flutter at one level within investment-grade territory or one position below that status, suggesting the operator’s credit profile is good with significant potential for improvements. Earlier this week, Fitch Ratings reinforced its “BBB-” rating and “stable” outlook for the parent company of FanDuel. 

The research company mentioned Flutter’s ability to generate free cash flow and its dedication to lowering leverage as key reasons for its positive outlook. 

“The Stable Outlook reflects Fitch’s expectation of Flutter’s leverage staying within its rating sensitivities, despite a recently announced sizeable share repurchase programme and acquisitions in Italy and Brazil. This is because we expect US operating profitability to continually improve, which would support growth in the group’s EBITDA and free cash flow (FCF) over the medium term,” noted Fitch.

The ratings agency stated that Flutter is expected to achieve "revenue growth in low double digits in 2025," with EBITDA margins increasing by 20% by 2027.