Bally’s Corporation is actively seeking to enhance its financial position through asset sales, equity issuance, and new debt as it faces increasing liquidity pressures tied to significant casino development projects.
In its recent financial report for the second quarter, Bally’s revealed a notable revenue increase, generating $792.2 million, which reflects a 20% rise compared to the previous year. However, regulatory documents indicate that the casino operator anticipates difficulties in meeting liquidity and leverage requirements unless it secures additional financing.
The company is currently investing heavily in major casino developments located in Chicago, New York, and Las Vegas, which has raised concerns about its financial stability. For the second consecutive quarter, Bally’s reported its earnings late and did not conduct an earnings call.
According to the filing, Bally’s requires new financing to comply with the conditions of its revolving credit facility. Without this funding, the company predicts it will not meet necessary liquidity levels and may breach its debt covenants within the next year.
Management highlighted that without completing the financing options discussed, and considering the planned reduction in revolving commitments, the company does not foresee meeting its liquidity maintenance requirements or the consolidated net leverage ratio covenant once reinstated.
To address its financial needs, Bally’s is exploring various options, including asset sales, equity issuance, and incurring new debt. In July, the company signed a non-binding term sheet for a loan intended to support the Bronx casino project and other corporate expenses, although it cautioned that this financing might not be finalized.
This cautionary note follows Bally’s earlier refinancing efforts this year, which included establishing a new $1.1 billion credit facility and repaying a $1.47 billion term loan due in 2028.
After announcing its earnings post-market on Friday, Bally’s stock price dropped from $13.99 to $12.85 within half an hour.
The urgency for new financing stems from Bally’s substantial cash usage in the first half of the year. The company reported using $265.9 million in operating cash from January to June, a significant increase from $21.4 million during the same period last year. This rise was largely attributed to $98.9 million in upfront licensing fees, increased net losses, and changes in working capital.
As a result, Bally’s cash and restricted cash reserves fell from $906.7 million at the start of the year to $487.8 million by the end of June. This financial strain prompted the company to issue a going-concern warning in its financial statements, expressing that its liquidity status and the risk of breaching its revolving credit facility terms “raise substantial doubt about the Company’s ability to continue as a going concern.” Bally’s further noted that its plans for raising new funds are not yet sufficiently solid to alleviate this uncertainty.
Bally’s has already tapped into its real estate assets to generate capital, selling the Bally’s Twin River property to Gaming and Leisure Properties (GLPI) for $700 million earlier this year. The sale netted $685 million, which was largely used to pay down debt, but it also resulted in an additional $56 million in annual rent obligations for the property.
Despite these liquidity concerns, Bally’s reported continued revenue growth, with second-quarter earnings rising 20% to $792.2 million. The Bally’s Intralot entities contributed an additional $92.8 million in revenue, alongside increased earnings from Queen and higher European gaming revenue. Revenue from Casinos & Resorts grew by 2% to $401 million, while North America Interactive surged by 16.9% to $66.1 million.