On March 5, Scientific Games announced that they would be offering notes in an attempt to raise $1.1 billion, which could be used to pay off unsecured notes that were due to mature in 2022. That goal appears to have been reached, as they have exceeded the $1 billion in outstanding unsecured notes.
The rate of return on the notes will be 8.25% according to the company and will exist as senior unsecured debt notes. They are to be paid by the year 2026 as the company guarantees payment of 100% on the issued price plus interest.
This appears to be a rather shrewd move by Scientific Games. By paying off the $1 billion in unsecured notes, they have actually decreased the amount of interest that they will have to pay to investors. The notes that were set to mature in 2022 had a 10% return on them, saving the company 1.75% per note while giving them additional time to pay those who purchased the notes. According to Deutsche Bank Securities, this is expected to save Scientific Games at least $9 million a year in interest payments.
Scientific Games has found itself in a bit of a financial mess over the last couple of years. Despite seeing a significant increase in profit in the fourth quarter of 2018, reaching nearly $207 million, the company still reported a net loss in 2018 of $353 million. This was an increase of over $110 million from the previous year.
The news does appear to be improving, however. Scientific Games has gone through a massive overhaul at the management level, and this has helped the company to reach several lucrative deals. In early January, SGC reached a deal with the Oneida Indian nation to provide the gaming technology for the three casinos that are located in upper New York.
Later in January, Scientific Games signed a deal with Paddy Power Betfair to provide gaming platforms in three European countries. That not only benefited Paddy Power by giving them access to over 2000 casino titles but also opened another market for SGC.
In the early part of March, SGC added to their European market by securing a deal in Turkey. The joint venture with Sans Girisim was a 10-year deal to set up mobile retail shops where people could place bets.
Scientific Games even reached a deal with Second State Gaming, LLC to set up software at 20 truck stops throughout the state of Pennsylvania, which will go live sometime in the spring of this year. This will provide as many as 100 games at each of the stops, expanding gambling within the state.
With these kinds of contracts in place, it is easy to see why investors were willing to take a risk on the unsecured notes. The company has proven themselves to be a worthwhile risk, which should help them to reach a profit by the end of 2019.
