Ladbrokes Coral Social Responsibility Failings Could Harm Credit Rating for GVC Holdings

Posted on: August 5, 2019, 10:19h. 

Last updated on: August 5, 2019, 11:01h.

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

GVC Holdings Plc, the owner of bookmaker Ladbrokes Coral, could face credit rating issues if the company doesn’t take adequate steps to prevent money laundering and protect gamblers vulnerable to addiction.

A Ladbrokes shop in the UK. Parent company GVC could face credit issues if it doesn’t boost the sportsbook’s responsibility policies. (Image: The Independent)

In late July, the UK Gambling Commission hit GVC with a £5.9 million ($7.1 million) fine for what the regulator deemed “systematic failure” by Ladbrokes Coral in implementing proper social responsibility policies and anti-money laundering protocols.

GVC can readily absorb this financial loss, the fine nevertheless reflects the risks of failing to properly manage the social considerations that apply to our evaluation of companies in this sector, a credit negative,” said Moody’s Investors Service in a recent note.

Moody’s has a Ba2 rating on GVC corporate debt with a “stable” outlook. Bonds with one of the three Ba ratings issued by the research firm are “judged to have speculative elements and are subject to substantial credit risk.”

The issues that drew the ire of the UK Gambling Commission occurred between November 2014 and October 2017, prior to GVC acquiring Ladbrokes Coral. As Casino.org reported last week, one customer was permitted to lose £1.5 million ($1.8 million) over that three-year span while another lost £98,000 ($119,000) in less than three years. Signs were there that those patrons could be problem gamblers. The customer who lost $1.8 million accessed his Ladbrokes account up to 10 times a day.

GVC bought Ladbrokes Coral last year for £3.2 billion ($3.8 billion).

Taking Steps To Fix The Problem

GVC has made some efforts to enhance its protections of bettors who may be wagering too much or over-playing.

The company “has since revised its procedures and management of player protection,” said Moody’s. ”GVC believes it now has a robust and industry-leading approach to player protection in place, and has said that it will continue to work with other gambling companies to improve player safety.”

GVC isn’t the first bookmaker to be slapped with a fine by the UK Gambling Commission for slack anti-money laundering and problem gambler procedures. Last year, the commission hit William Hill with a £6.2 million ($8.7 million) penalty for not preventing 10 customers from wagering with money that was derived through criminal activities.

Moody’s believes gaming companies should be diligent in taking steps to avoid such financial punishments because social elements are prominent factors in evaluating debt ratings in the industry.

“Social considerations are a relevant rating factor for gambling companies, and are likely to remain an issue facing the sector along with taxation increases,” said the ratings agency.

Government Involvement

Governments across Europe, including in Germany, Italy, and the UK, are making moves to beef up anti-money laundering policies and improve policies related to at-risk gamblers. In the UK, the maximum wager on fixed-odds betting terminals was recently lowered to £2 ($2.43) from £100 ($121.58).

GVC and William Hill could close 900 and 700 of their betting shops as a result of that new policy, according to Moody’s. The companies own 5,800 stores in the UK combined.