AGS Successfully Completes Term Loan Repricing; Voluntarily Repays $15 Million of Its Total Debt Outstanding
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Insights
The repricing of PlayAGS, Inc.'s term loan credit facility signifies a strategic financial move to reduce borrowing costs. By eliminating the credit spread adjustment and lowering the interest rate to SOFR plus 3.75%, the company is capitalizing on the current low-rate environment to decrease its interest expenses. This is a common strategy for companies looking to improve their balance sheets and reduce financial strain.
From a financial analysis standpoint, the voluntary repayment of $15 million in debt is a positive signal that the company is generating sufficient cash flows to manage its debt proactively. The anticipated annualized savings of over $3 million in cash interest expense will likely improve the company's net income and could be a catalyst for a more favorable debt-to-equity ratio, which is a key metric for assessing a company's financial health.
Investors and stakeholders should note that such financial engineering, while beneficial in the short term, must be coupled with sustainable operational performance. The focus on reducing net leverage through Adjusted EBITDA growth and free cash flow conversion is crucial, as it reflects the company's ability to generate earnings and convert those earnings into cash efficiently.
PlayAGS, Inc.'s focus on diversifying its gaming experiences aligns with industry trends, where companies are increasingly seeking to expand their product portfolios to cater to a broad range of customers. In the gaming sector, innovation and customer engagement are key drivers of growth. Therefore, the company's strategic positioning to offer a diverse mix of gaming products, including Class II and Class III slot products, table products and online gaming solutions, positions it well to capitalize on market opportunities.
However, it's important to monitor the competitive landscape and the potential impact of regulatory changes on the gaming industry. Changes in gaming legislation, consumer preferences and technology advancements can significantly influence the company's performance. A comprehensive understanding of these factors is essential for investors to gauge the potential for long-term growth and market share expansion.
The decision to reprice the term loan credit facility to a rate tied to the Secured Overnight Financing Rate (SOFR) reflects broader economic conditions. SOFR, which is a benchmark interest rate for dollar-denominated derivatives and loans, replaced LIBOR and is based on transactions in the Treasury repurchase market. It's a risk-free rate that represents a fundamental shift in the pricing of credit.
By tying the interest rate to SOFR plus a fixed spread, PlayAGS, Inc. is benefiting from a predictable and potentially lower cost of borrowing, which is an advantage in an uncertain economic climate. This strategic financial move could be indicative of the company's anticipation of a stable or declining interest rate environment. Stakeholders should consider how macroeconomic factors, such as interest rate trends and monetary policy, could influence the cost of capital for businesses in the gaming industry and beyond.
LAS VEGAS, Feb. 05, 2024 (GLOBE NEWSWIRE) -- PlayAGS, Inc. (NYSE: AGS) ("AGS" or the "Company") today announced it has successfully completed a repricing of its term loan credit facility. Among other things, the repricing removes the credit spread adjustment with respect to term loan borrowings and reduces the interest rate applied to such borrowings to the Secured Overnight Financing Rate (“SOFR”) plus
In addressing the repricing and repayment activity, AGS Chief Financial Officer, Kimo Akiona, commented, “As an organization, we remain singularly focused on reducing net leverage through a combination of consistent Adjusted EBITDA growth and improving free cash flow conversion. To that end, today’s announced transactions should help to expedite the achievement of our near and intermediate-term deleveraging objectives.”
Company Overview
AGS is a global company focused on creating a diverse mix of entertaining gaming experiences for every kind of player. Our roots are firmly planted in the Class II tribal gaming market, but our customer-centric culture and remarkable growth have helped us branch out to become one of the most all-inclusive commercial gaming equipment suppliers in the world. Powered by high-performing Class II and Class III slot products, an expansive table products portfolio, highly rated social casino, real-money gaming solutions for players and operators, and best-in-class service, we offer an unmatched value proposition for our casino partners. Learn more at playags.com.
AGS Investor & Media Contacts:
Brad Boyer, Senior Vice President Corporate Operations and Investor Relations
investors@playags.com
Julia Boguslawski, Chief Marketing Officer
jboguslawski@playags.com
©2024 PlayAGS, Inc. Products referenced herein are sold by AGS LLC or other subsidiaries of PlayAGS, Inc. Solely for convenience, marks, trademarks and trade names referred to in this press release appear without the ® and TM and SM symbols, but such references are not intended to indicate, in any way, that PlayAGS, Inc. will not assert, to the fullest extent under applicable law, its rights or the rights of the applicable licensor to these marks, trademarks and trade names.
Forward-Looking Statements
This release contains, and oral statements made from time to time by our representatives may contain, forward-looking statements based on management's current expectations and projections, which are intended to qualify for the safe harbor of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the proposed public offering and other statements identified by words such as "believe," "will," "may," "might," "likely," "expect," "anticipates," "intends," "plans," "seeks," "estimates," "believes," "continues," "projects," "targets" and similar references to future periods, or by the inclusion of forecasts or projections. All forward-looking statements are based on current expectations and projections of future events.
These forward-looking statements reflect the current views, models, and assumptions of AGS, and are subject to various risks and uncertainties that cannot be predicted or qualified and could cause actual results in AGS's performance to differ materially from those expressed or implied by such forward looking statements. These risks and uncertainties include, but are not limited to, the ability of AGS to maintain strategic alliances, unit placements or installations, grow revenue, garner new market share, secure new licenses in new jurisdictions, successfully develop or place proprietary product, comply with regulations, have its games approved by relevant jurisdictions, the effects of COVID-19 on the Company's business and results of operations and other factors set forth under Item 1. "Business," Item 1A. "Risk Factors" in AGS's Annual Report on Form 10-K, filed with the SEC. All forward-looking statements made herein are expressly qualified in their entirety by these cautionary statements and there can be no assurance that the actual results, events or developments referenced herein will occur or be realized. Readers are cautioned that all forward-looking statements speak only to the facts and circumstances present as of the date of this press release. AGS expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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