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Fitch: European High-Yield Gaming Issuers Remain Stable Despite Evolving Regulatory Regimes
May 2, 2017 / 11:12 AM / in 7 months

Fitch: European High-Yield Gaming Issuers Remain Stable Despite Evolving Regulatory Regimes

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: European Gaming: Speculative-Grade Handbook here LONDON, May 02 (Fitch) Fitch Ratings - London: Fitch Ratings says most European gaming issuers in its universe have cash-generative business profiles and sufficient liquidity to support deleveraging. However, execution risk remains as operators attempt to balance mature brick-and-mortar retail business models with fast-growing online gaming. In particular, the evolving regulatory regime in many countries means operators must invest to remain competitive or face the risk of losing market share and profitability. In its inaugural European Gaming: Speculative-Grade Handbook which provides industry analysis and case studies on various gaming issuers, Fitch says the supportive economic outlook and positive sector trends will facilitate deleveraging across the sector, driven by sustainable top-line growth and margin expansion. One-third of the high-yield gaming operators rated 'b+*' and below have been assigned positive trends given strong deleveraging prospects, improving FCF and liquidity, as well as strengthened business models following the wave of consolidation in the sector. The European gaming sector is characterised by diverse regulatory frameworks with some countries having monopolistic regimes run by a sole operator, and others having established concession systems for multi-operators. This can be a source of volatility if the country introduces new rules and regulations unexpectedly. For instance, the machines triennial review in the UK, the betting concessions renewal in Italy, and the expiry of the current license regime in Germany in 2017 could have an impact on European gaming operators' profitability and business models. Fitch says consolidation will continue in Europe. Previous M&A transactions shared a common strategic aim of mitigating the adverse impact of the highly competitive landscape and the tightening of regulation. For example, after the large M&A transactions seen in 2016, it is unlikely there will be any further activity until the outcome of the UK machines triennial review concludes and there is more visibility on gaming valuations. Operators of large betting-shop portfolios including Ladbrokes Coral and William Hill will probably shape their future strategy around this outcome, and if it is detrimental it could drive a further wave of consolidation and geographic diversification in the sector. The full report European Gaming: Speculative-Grade Handbook is available at Case studies and credit profiles include Ladbrokes Coral, William Hill, International Game Technology, Gamenet, Schuman, Snai and Codere. At present Fitch maintains ratings and credit opinions on 13 credits in the European leveraged loan and high-yield bond markets. Contact: Timothy Li Director +44 20 3530 1386 Fitch Ratings Limited 30 North Colonnade London E14 5GN Paula Murphy Director +44 20 3530 1718 Patrick Durcan Analyst +44 20 3530 1298 Peter Wormald Analyst +44 20 3530 1357 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. 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Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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