Scientific Games Lottery floats price guidance for $880M of senior notes

A Barclays-led bookrunner group is circulating price talk at 6.50%-6.75% for an $880 million tranche of eight-year senior unsecured notes pitched in connection with the acquisition of Scientific Games' lottery business by Brookfield Business Partners, according to sources. Books for the deal will close at 10 a.m. ET on Feb. 3.

Scientific Games Lottery, based in Atlanta, is a diversified global lottery partner with long-standing relationships with approximately 130 government and nongovernment lottery entities in over 50 countries. Scientific Games Corp. announced in October 2021 that it was selling the lottery business to Brookfield Business Partners for a total consideration of $6.05 billion, comprising $5.825 billion in cash plus an earnout of up to $225 million based on EBITDA targets in 2022 and 2023.

A seven-year, covenant-lite cross-border term loan B split between a $1.77 billion dollar-denominated tranche and a $750 million-equivalent, or roughly €662 million, euro-denominated tranche also supports the transaction. In addition to the debt financing, funding will include $2.5 billion of common equity, according to S&P Global Ratings.

Price talk for the loan transaction was revised earlier today for the dollar tranche to a spread of 350-375 basis points above the secured overnight financing rate, with a 0.5% floor and an original issue discount of 99.5. There is no credit spread adjustment on this tranche. Initial guidance was a spread in the range of 375-400 bps. The euro term loan is now talked at E+400-425, from E+425 at launch, with a 0% floor and an OID of 99.5, which is the tight end of the 99-99.5 range outlined at launch.

Deutsche Bank, BNP Paribas, Credit Agricole, Macquarie, RBC Capital Markets, BMO Capital Markets, Citi, Goldman Sachs, HSBC, Morgan Stanley, MUFG, Société Générale and Wells Fargo are also bookrunners for the bonds. The fixed-rate debt will be non-callable for three years, with a first call at par plus 50% of the coupon. The notes will also sport an up-to-40% equity claw at par plus the coupon for three years.

Scientific Games Holdings LP, the issuing entity for the debt, is rated B+/B3/B with stable outlooks at S&P Global Ratings, Moody's and Fitch. The senior notes are rated B/Caa2/B. The term loan has garnered B+/B2/BB- grades.