Scientific Games talks $1.7 billion term B-2 at Libor plus 425-450 bps

By Sara Rosenberg

New York, Sept. 4 – Scientific Games Corp. is talking its $1,735,000,000 seven-year incremental covenant-light term loan B-2 at Libor plus 425 basis points to 450 bps with a 1% Libor floor and an original issue discount of 99, according to a market source.

The B-2 loan has 101 soft call protection for six months, the source said.

Amortization on the term loan is 1% per annum.

The term loan B-2 has a 50% excess cash flow sweep, stepping down to 25% when net secured leverage is 3 times and 0% when net secured leverage is 2 times.

By comparison, previous filings with the Securities and Exchange Commission had the term loan pricing estimated around Libor plus 375 bps with a 1% Libor floor.

The company’s $2,085,000,000 of incremental senior secured bank debt (BB-) also includes a $350 million revolver due Oct. 18, 2018.

The debt has an incremental allowance of $350 million and first-lien leverage of 3.25 times.

In addition, the company is looking to amend its existing $2,289,000,000 senior secured term loan B due Oct. 18, 2020 and existing $300 million senior secured revolver due Oct. 18, 2018 to allow for the new debt.

With the amendment, pricing on the existing term loan B will be set at 25 bps lower than the final spread on the term loan B-2, while the 1% Libor floor will be unchanged. The term loan B will also have its 101 soft call protection reset for six months.

Amendment consents are due at 5 p.m. ET on Wednesday and commitment for the incremental revolver and term loan B-2 are due on Sept. 15.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Fifth Third, HSBC Securities (USA) Inc. and PNC Capital Markets are the lead banks on the deal that launched with a bank meeting on Wednesday.

Proceeds will be used to help fund the acquisition of Bally Technologies Inc. for $83.30 per share in cash, for a total transaction value of about $5.1 billion, including net debt of around $1.8 billion.

Other funds for the transaction will come from $750 million in seven-year senior secured notes, $2.2 billion in eight-year senior unsecured notes, $500 million in 10-year senior unsecured notes and $118 million in cash on hand.

Backing the notes is a $3.45 billion one-year bridge loan commitment, consisting of a $750 million senior secured tranche priced at Libor plus 475 bps with a 1% Libor floor, a $2.2 billion unsecured eight-year tranche priced at Libor plus 625 bps with a 1% Libor floor, and a $500 million unsecured 10-year tranche priced at Libor plus 675 bps with a 1% Libor floor. The spread on all tranches will increase by 50 bps every three months until it hits a specified cap.

Net secured leverage is expected at 3.7 times and net total leverage is expected at 6/4 times.

Closing is anticipated by year-end, subject to receipt of Bally shareholder approval, gaming regulatory approvals and other customary conditions.

Scientific Games is a New York-based developer of technology-based products and services and associated content for gaming and lottery markets. Bally Technologies is a Las Vegas-based provider of games, table game products, systems, mobile and iGaming solutions to gaming operators.

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