Light & Wonder cuts leverage markedly after asset sale, pays $4.9 billion debt to begin Q2

By Devika Patel

Knoxville, Tenn., May 11 – Light & Wonder Inc., formerly known as Scientific Games Corp., paid down $4.9 billion of debt using the proceeds from the sale of its lottery business, reducing the company’s net leverage ratio dramatically to 3.7x from 6.1x before the sale of the business and from 10.5x just over a year ago.

This has radically changed Light & Wonder’s balance sheet.

“We used the proceeds from the lottery sales to pay down debt, our number one priority, radically transforming our balance sheet,” president and chief executive officer Barry Cottle said on the company’s first quarter ended March 31 earnings conference call on Tuesday.

“A little over a year ago, our net debt leverage ratio peaked at 10.5x, and now, post the lottery sales and our refinancing transactions, our adjusted net debt leverage ratio sits at 3.7x, a reduction of approximately 7 turns,” Cottle said.

The company reduced outstanding debt to $4 billion from $8.9 billion with the lottery sale, and the net debt leverage ratio consequently fell to 3.7x from 6.1x, a 40% drop.

“From a balance sheet perspective, we made tremendous progress since our last earnings call,” executive vice president, treasurer and chief financial officer Connie James said on the call.

“Following our closing of the lottery sale on April 4, we took advantage of a window in the capital markets and moved quickly to pay down our debt and successfully completed a series of debt refinancing transactions, delivering on our promise to transform our balance sheet.

“We reduced the principal amount of our outstanding debt from $8.9 billion at March 31 to $4 billion post the refinancing transactions and our net debt leverage ratio declined from 6.1x reported to an adjusted net debt leverage ratio, reflecting the sale of our lottery business and refinancing transactions, of 3.7x, an approximately 40% reduction.

“I can’t emphasize enough what a significant and fundamental change this is for our business and credit profile,” she said.

The company also negotiated a new term loan, and management is confident it can reach the target net debt leverage ratio range of 2.5x to 3.5x by selling its sports betting business and using the funds to take out higher coupon debt.

“We were able to put in place a new term loan with a covenant-lite structure, take out some of our existing high-coupon debt and increase the weighted average life of our debt to 6.4 years,” James said.

“We saw strong oversubscription for our new term loan, reflecting our significantly strengthened financial and credit profile enabling us to drive favorable pricing and, with the expected closing on the sale of our sports business, we plan to take out more of our high-coupon debt, which is expected to put us squarely in our target net debt leverage ratio range of 2.5x to 3.5x.

“No longer will we be burdened by the high levels of debt and the associated cost to maintain it.

“With the refinancing steps we have taken, we estimate annual cash interest savings of approximately $225 million on a run rate basis, a 47% reduction,” James said.

Cash and cash equivalents were $496 million as of March 31, 2022, compared to $585 million as of Dec. 31, 2021.

Long-term debt, excluding current portion, was $8,789,000,000 as of March 31, 2022, compared to $8,646,000,000 as of Dec. 31, 2021.

Current portion of long-term debt was $44 million as of March 31, 2022, unchanged compared to the balance as of Dec. 31, 2021.

Light & Wonder is a Las Vegas-based cross-platform games and entertainment company.

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