A story in Bloomberg News last week cited unnamed sources in reporting that the consortium of three banks hired to sell .19 billion in bridge loans to support the .1 billion purchase of diversified gaming supplier Bally Technologies by lottery giant Scientific Games has delayed syndicating the loans.
According to the report, JPMorgan, Bank of America Corp. and Deutsche Bank AG, hired by Scientific Games to sell the bridge loan, “failed to gather interest from investors by an October 3 deadline.” The report identified the sources only as “four people with knowledge of the matter.”
Scientific Games CEO Gavin Isaacs said the reports were bogus and blamed them on short sellers and certain SEC violations.
“I don’t like the fact that short sellers are in our industry,” he said, “ but I can deal with them. What I can’t control are short sellers who violate SEC regulations.” Isaacs suggested he would report that bogus reports to the SEC and let the chips fall where they may.
The report says the marketing of the loans failed amid concerns of a new economic slowdown in the U.S. The bridge loans would be paid with a bond sale, the prospects for which are evidently in doubt by the banking consortium. Should they fail to sell the bonds, the investors would be left holding the bag for the debt, which would be an estimated eight times earnings before interest, taxes, depreciation and amortization for the newly merged company.
Bank of America agreed to underwrite 37.5 percent of a total $3.25 billion in funds to Scientific Games’ deal, according to a prior filing with the U.S. Securities and Exchange Commission. JPMorgan agreed to fund 34.4 percent and Deutsche Bank took 28.1 percent. None of the banks would comment on the Bloomberg report.
Scientific Games could still raise the acquisition capital it needs by issuing corporate bonds to repay the financing parties, the report said.
Isaacs said the deal was still on track, and said debt would be reduced by increased EBIDTA.
“Our goal is to primarily use our increased free cash flow to pay down debt and bring our leverage ratios back to more optimal levels,” Isaacs told attendees at the conference of the International Association of Gaming Advisors in Philadelphia last week. “The short sellers lost their bets today.”
Bloomberg report surfaced, but rebounded to a more than 20 percent increase the day after Isaacs rebutted the report.
