International Game Technology PLC's Ratings Lowered To 'BB' And Placed On CreditWatch Negative

  • The Italian government has implemented certain stringent quarantine measures in response to the coronavirus pandemic. The quarantine bans all nonessential travel and closes nonessential commercial activity, including gaming.
  • Additionally, a number of U.S. states and gaming regulatory agencies have mandated temporary casinos closures, which we believe will further impair International Game Technology PLC (IGT)'s operating performance this year.
  • As a result, we are lowering ratings on IGT by one notch, including the issuer credit rating, to 'BB' from 'BB+', and placing all ratings on Credit Watch with negative implications.
  • In resolving the CreditWatch placement, we plan to update our base case forecast for IGT's EBITDA, cash flow, liquidity, and leverage in light of the quarantine in Italy and the temporary closures of casinos around the U.S. Additionally, we plan to assess the potential for recovery in the second half of 2020 and 2021 given an increasing likelihood the pandemic could weigh on consumer discretionary spending even after the virus is contained.
NEW YORK (S&P Global Ratings) March 17, 2020—S&P Global Ratings today took the rating actions above. The downgrade reflects a significant anticipated loss of revenue and cash flow at least in 2020 compared with our prior base case estimates, stemming from country-specific measures that have been put in place in response to the coronavirus pandemic, particularly in Italy, and its likely impact on consumer discretionary spending. Italy has implemented a countrywide lockdown, closing down all commercial and retail businesses except those providing essential services, like grocery stores and pharmacies. We believe these actions will lead to a decline in consumer discretionary spend, including on gaming, which could persist even once the lockdown ends. IGT has a sizable revenue concentration in Italy, generating between 30% to 40% of its revenues from its Italian operations.

In resolving the CreditWatch placement, we plan to update our base case forecast for IGT's EBITDA, cash flow, liquidity, and leverage in light of the quarantine in Italy and the temporary closures of casinos around the U.S. Additionally, we plan to assess the potential for recovery in the second half of 2020 and 2021 given an increasing likelihood that the pandemic could weigh on consumer discretionary spending even after the virus is contained. We may also reassess IGT's competitive position in light of its concentration in Italy and the ongoing regulatory and economic headwinds there. If we conclude that business risks are heightened for a prolonged period, we may tighten leverage thresholds for IGT.
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