Blog

Flutter Entertainment Refinances Loan, Cuts Interest Expenses

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

The action taken by FanDuel's parent company — 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 granted, Flutter utilized it to refinance existing debt, extending its maturity dates to span from 2028 to 2030. Fitch Ratings assigned a “BBB” rating to the loan, and the previously mentioned refinancing does not alter the maturity date set for 2030. 

The Importance of Flutter Refinancing 

As mentioned earlier, the repricing of the term loan allows Flutter to save $10 million annually on interest expenses. Although this figure may be minor for a company valued at $46.53 billion, the savings could be utilized in areas of the business that generate value. 

The refinancing indicates to investors that the gaming firm 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 parent company of Betfair might also utilize some of the savings from interest to back its recently revealed share buyback initiative or to maintain its pattern of value-enhancing acquisitions. 

Flutter Credit Profile Strong 

The leading rating agencies assess Flutter as either one level within investment-grade territory or just one tier below that level, suggesting that the operator’s credit profile is respectable with significant potential for upgrades. 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 decreasing 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 indicated that Flutter is expected to achieve “low double-digit revenue growth in 2025,” with EBITDA margins rising by 20% by 2027.