Flutter Entertainment Refinances Loan, Cuts Interest Expenses

Flutter Entertainment Refinances Loan, Cuts Interest Expenses

Flutter Entertainment (NYSE: FLUT) announced it has refinanced $3.885 billion of a term loan that was issued to the gaming firm in November 2023. 

The action taken by the parent organization of FanDuel — the biggest online sportsbook operator in the US — leads to a reduced interest rate and savings on yearly interest costs.

"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.

Thirteen months ago, when the term loan was released, Flutter utilized it to refinance existing debt, extending its maturity periods to between 2028 and 2030. Fitch Ratings assigned a “BBB” rating to the loan, and the refinancing mentioned does not lead to changes in the 2030 maturity date. 

The Importance of Flutter Refinancing 

As mentioned earlier, the repricing of the term loan allows Flutter to reduce interest expenses by $10 million annually. Although this figure may seem minor for a company with a market cap of $46.53 billion, these savings could be invested in areas of the business that create value. 

The refinancing indicates to investors that the gaming company is capitalizing on falling interest rates while focusing on strengthening 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 might also apply some of the savings from interest to back its recently revealed share buyback initiative or to maintain its track record of beneficial acquisitions. 

Flutter Credit Profile Strong 

The primary ratings agencies classify Flutter as one level into investment-grade range or one step below that level, suggesting that the operator's credit standing is satisfactory with significant potential for improvements. Earlier this week, Fitch Ratings confirmed its "BBB-" rating and "stable" outlook for the parent company of FanDuel. 

The research company mentioned Flutter’s ability to generate free cash flow and its dedication to lowering leverage as some of the reasons for its positive outlook. 

“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 stated that Flutter is expected to achieve “low double-digit revenue growth in 2025” with EBITDA margins increasing to 20% by 2027.