International investors shy away from 888 debts

Celebrations to mark the acquisition of William Hill by 888 were dampened last week, after reports suggested international banks were having trouble selling the firm’s debts to investors. The £2bn acquisition of William Hill’s non-US assets by 888 completed on Friday, with the firm’s stock being readmitted to the London Stock Exchange this morning. However, investment banks JPMorgan and Morgan Stanley, which are serving as the firm’s debt underwriters, are having trouble finding specialist investment funds willing to take on these debts, according to reports in the Financial Times. As part of its acquisition of William Hill, 888 commenced an offering of credit notes totalling more than £1bn, inclusive of US dollar-denominated loans maturing in 2028 and euro-denominated notes due in 2027 and 2028 respectively last month. In addition, 888 entered into new credit arrangements comprising a £401m euro-denominated loan facility and a £358m British pound denominated loan facility, with both expected to mature in 2028. In addition, 888 signed a deal to secure a £150m multicurrency revolving credit facility. Traditionally, in these sorts of arrangements, banks agree to underwrite the debts, selling it onto specialist funds in return for a stated yield, which in the case of 888/Hills is understood to have been a yield of 10%. Banks can often make losses on these arrangements if investors demand higher yields than those initially set. JPMorgan and Morgan Stanley had been due to conclude these sales last week, with the deal trading at a discounted rate of 92 to 93 cents on the dollar. However, JPMorgan has reportedly confirmed the sale will now conclude by the middle of this week, a delay the investment bank claimed was down to delays finalising documentation and the impact of the 4 July bank holiday weekend on investment in the US loans. The FT report suggests that so-called ‘tepid’ demand from investors had forced the delay in the sale, with the newspaper citing bond and loan fund manager sources which had suggested they would soon have to reprice the yield on the debts to a higher level in order to attract investment, discounting it even further. This lack of demand is not reportedly endemic to gambling stocks, with several other US corporate bond sales having to be repriced in recent weeks following lower than expected interest. Other factors highlighted by the FT as potentially impeding interest in the 888 debts include rising inflation and the impending publication of the white paper review into the Gambling Act 2005. The publication of the white paper is currently the subject of a lot of speculation in the sector, with recent reports suggesting the government will look to implement swingeing restrictions on stake limits and games which could affect both retail and online operators alike. 888 did not comment on the speculation surrounding its debts after being approached by EGR.