Gambling company 888 to slash £1.6bn debt to quell investor fears

Online betting company 888 plans to slash the £1.6bn debt pile that fuelled its acquisition of William Hill’s non-US business in an attempt to quell investor fears about the impact of higher interest rates.

The Gibraltar-based betting group said on Tuesday that it was “more exposed” to higher rates because the structure of the £1.95bn William Hill purchase “resulted in the group’s net debt being higher than was anticipated”.

888 vowed to take an “extremely disciplined approach” to capital allocation as it set a target of cutting net debt from around 5.7 times earnings to 3.5 times by the end of 2025.

The gambling company’s net debt totalled £1.6bn at the end of September, of which 64 per cent was at floating rates, affecting its “ability to reinvest excess cash flow in accelerating growth in the short term”.

Central banks worldwide have upped interest rates in recent months to tame soaring inflation, adding to borrowing costs.

888 also pledged to increase full-year revenues from about £1.85bn to more than £2bn by 2025. The group’s results have been hit recently by its temporary exit from the Netherlands following the loss of its gambling licence and by investment in safer gambling measures in anticipation of a UK government review of the industry.

In July, 888 completed the purchase of William Hill’s operations outside the US, which included 1,500 UK betting shops and online operations in markets such as Italy and Spain, from casino operator Caesars.

Itai Pazner, 888 chief executive, said he would “[unlock] the significant benefits of the combination of 888 and William Hill”. “Over the next two years we plan to fully integrate our business — creating a bigger, stronger and better organisation with higher profit margins,” he added.

The group said it would tap the debt markets again in the coming months to access money to refinance up to £347mn of bank loans related to the William Hill acquisition.

Banks including JPMorgan and Morgan Stanley, which backed 888’s £1bn bond and loan deal to finance the William Hill purchase, were forced to absorb a loss on the debt when selling it on to specialist funds over the summer.

Shares in the London-listed group were flat in morning trading. The stock has lost around two-thirds of its value so far this year.