Flutter Entertainment Refinances Loan, Cuts Interest Expenses

Posted on: December 20, 2024, 02:20h. 

Last updated on: December 20, 2024, 02:20h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Flutter Entertainment (NYSE: FLUT) said it refinanced $3.885 billion of a term loan issued to the gaming company in November 2023.

Flutter FOX Bet
The Flutter logo as seen in an investor deck. The company refinanced a term loan and will save $10 million annually as a result. (Image: Flutter Entertainment)

The move by the parent company of FanDuel — the largest online sportsbook operator in the US — results in a lower interest rate and savings on annual interest expenses.

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.

When the term loan was issued 13 months ago, Flutter used it to refinance other debt, pushing its maturity windows out to 2028 to 2030. The loan was rated “BBB” by Fitch Ratings and the aforementioned refinancing doesn’t result in adjustments to the 2030 maturity date.

Why Flutter Refinancing Matters

As noted above, the repricing of the term loan paves the way for Flutter to save $10 million per year in interest expenses and while that may be a small number for a company with a market capitalization of $46.53 billion, the savings could be deployed toward value-generating areas of the business.

The refinancing also signals to investors that the gaming company is taking advantage of declining interest rates while prioritizing firming 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 could also use some of the interest savings to support its recently announced share repurchase program or to continue its history of accretive acquisitions.

Flutter Credit Profile Solid

The major ratings agencies rate Flutter one notch into investment-grade territory or one level below that status, indicating the operator’s credit profile is decent with ample room for upgrades. Earlier this week, Fitch Ratings affirmed its “BBB-“ grade and “stable” outlook on the FanDuel parent.

The research firm cited Flutter’s free cash flow capabilities and commitment to reducing leverage as among the reasons for its constructive view.

“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 added Flutter should notch “revenue growth in low double digits in 2025” as EBITDA margins swell 20% by 2027.