Lottomatica out with talk on €400M offering of 5-year PIK toggle notes

Lottomatica SpA is out with price talk in the 8.25% area on its planned €400 million offering of five-year (non-call two) senior secured pay-if-you-can payment-in-kind, or PIK, toggle notes. Initial price thoughts were for a low 8% yield. Books close Nov. 5 at 9 a.m. London time, with pricing expected to follow.

Barclays (B&D) and Goldman Sachs are joint global coordinators and physical bookrunners. Credit Suisse, Deutsche Bank, J.P. Morgan, Morgan Stanley and UniCredit are joint bookrunners, while Apollo is a co-manager.

The notes will be issued at holding company level via Gamma Bondco Sarl, and proceeds are earmarked to fund a dividend to shareholders worth €375 million. Lottomatica is backed by private equity group Apollo, which acquired the company earlier this year via its portfolio company Gamenet.

Gamenet's acquisition of Lottomatica was funded by the sale in March of €575 million of 5.125% notes due 2025, which were issued via Gamma Bidco. Those bonds closed Nov. 3 at 100.75, to yield 4.823%, according to S&P Global Market Intelligence data.

Ratings for the security are out at CCC+ and Caa1 at S&P Global Ratings and Moody's, respectively. Ratings has affirmed corporate ratings at B, but Moody's has downgraded the company rating to B2, citing the "unexpected and aggressive nature of the dividend recapitalization transaction."

Investor feedback has been mixed, with one describing the readiness of sponsor to pay a such a chunky yield for a dividend recapitalization as a "red flag." Other market sources that find the business model attractive and are comfortable with PIK toggle format are happy to take the big yield on offer, however.

Lottomatica is an Italian online sports betting and gaming machines provider. The company was acquired for €950 million by Gamenet Group earlier this year.