Fitch Ratings has maintained Everi Holdings Inc.'s 'BB-' Long-Term Issuer Default Rating (IDR) and debt instruments on Rating Watch Positive (RWP).

On July 26, 2024, Everi entered into definitive agreements with International Game Technology PLC (IGT) and Voyager Parent, LLC, whereby IGT Gaming and Everi would be simultaneously acquired by Voyager in an all-cash transaction.

The Rating Watch reflects the expectation of a stronger credit post-merger, due to the increased scale and diversification of the combined entity with IGT, material synergy opportunities, and potential growth. The combined entity generated 2024 pro forma revenue and adjusted EBITDA of $2.6 billion and $1.1 billion, respectively.

Fitch expects to resolve the Rating Watch upon completion of the transaction under the announced terms, which is likely to occur in late June or early July 2025, or more than six months beyond the assignment of the Watch.

Key Rating Drivers

Comprehensive Product Portfolio: The combined entity would offer one-stop shopping across land-based gaming, iGaming, sports betting, and fintech. The revenue stream is diversified, with gaming operations accounting for 29%, gaming sales 23%, Systems and Software 23%, FinTech 15%, and digital 10%. Management estimates mid-single-digit revenue growth through 2026 based on current business plans. Further growth potential includes distribution of Everi's content into IGT's existing networks, distribution of FinTech solutions in international and distributed gaming markets, and expansion of IGT game content into the Class II category.

Expanded Slot Market Share: Pro forma for the combination, the company would have an installed base of approximately 70,000 units, surpassing Light & Wonder, Inc. (BB/Stable), which has 54,397. Fitch estimates the combined pro forma slots sales market share in North America (LTM 3Q24) will exceed that of Light & Wonder, and Aristocrat Leisure Ltd. (BBB-/Positive). The merger should enable more cross-selling opportunities between the two entities.

Expected Synergy Benefits: Management expects $140 million in run-rate cost synergies to be realized by the third year. These enhancements have been identified through the impact of a larger scale on supply chain and cost optimization, streamlined operations, and real estate consolidation. Management expects further savings of $20 million to be realized in lower capex spending through synergies.

Moderate Pro Forma Leverage: Pro forma gross EBITDA leverage will be 4.0x, moderating sequentially to 3.5x over the forecast period due to EBITDA growth and required term loan amortization. Fitch believes the new combined entity has stronger business operations due to the increased scale, product diversification, synergies, and improved market position.

Transaction Update: Debt financing is already in place, including an undrawn revolver of $750 million, $2.475 billion in term loans, and $1.85 billion in senior secured notes. The transaction is currently awaiting final approval from certain state gaming commissions and is expected to close in late June or early July 2025.

Everi Standalone Rating: Everi's standalone rating reflects relatively low gross leverage of 3.1x as of Dec. 31, 2024, solid liquidity, and expected continued FCF generation. The company's FinTech sector contributes approximately 44% of consolidated EBITDA, with most of the revenue derived from ATM and cash advance service fees tied to contracts typically with three- and five-year terms and high renewal rates. This recurring revenue provides near-term cash flow certainty, although technology risk remains uncertain in the long term.

Peer Analysis

Everi's 'BB-' IDR reflects its low leverage, broad diversification, strong momentum in growing its class III slots business, and solid market position in cash access systems and class II slots. Negative credit considerations include Everi's niche position within the slots segment, relative to larger suppliers, and declining ship share over the last two years.

Pro forma for the transaction, EBITDA leverage would be 4.0x, which compares with Light & Wonder at 3.2x and Aristocrat Leisure at 0.8x. Pro forma revenues and EBITDA of $2.6 billion and $1.1 billion, respectively, are slightly lower than those of Light & Wonder ($3.2 billion and $1.3 billion) and well below Aristocrat ($4.3 billion and $1.6 billion, adjusted for the current Australian dollar exchange rate). Although both Light & Wonder and Aristocrat Leisure have a stronger presence in iGaming, Everi's FinTech segment offers a unique and compelling growth opportunity - given IGT's sales presence and existing market position.

Key Assumptions

Total revenue declines 3.4% in 2025 due to weakness in gaming operations and increases to low-single digits as operations stabilize;

EBITDA margins in the 37% to 39% range;

Base interest rates applicable to the company's outstanding variable-rate debt obligations reflects current SOFR forward curve;

FCF of approximately $60 million-$80million over the forecast horizon.

Capex approximating 17%-18% of revenue.

Settlement receivables and liabilities are cash flow-neutral;

No incremental debt paydown aside from $6 million of annual amortization of the term loan.

RATING SENSITIVITIES

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

EBITDA leverage sustained above 3.5x;

Significant deterioration or loss of market share in the gaming and FinTech segments;

Adoption of a more aggressive financial policy, either toward target leverage or approach to shareholder returns to the detriment to the credit profile.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Fitch expects to resolve the Rating Watch upon completion of the contemplated transaction under the proposed terms.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade Independent of the Transaction:

Continued market share gains in the U.S. gaming equipment industry, particularly with respect to its Class III business;

Continued diversification away from payment processing;

EBITDA leverage sustained below 3.0x.

Liquidity and Debt Structure

Everi had a net cash position of $77 million, or $713 million gross of net settlement liabilities, and full availability on its $125 million revolver as of March 31, 2025. Everi generated about $162 million in Fitch-defined FCF (cash flow from operations minus capex and controlling for settlement working-capital swings) in 2024. Amortization of its term loan is minimal relative to the company's FCF generating ability.

Issuer Profile

Everi Holdings is a provider of slots and cash services to the casino industry, specializing in class II and class III slots and is a leading provider of cash access products and services for the casino industry.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

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