Mike O. Responds.

[Aequitas58]

Yea.

[2Tone]

A 2+2er also dug up this article.


I'm no expert on these matters, but if it is true they only have $7 mil cash, that would be a serious concern.

PartyGaming could seek new credit facility
By Roger Blitz and Peter Thal Larsen

Published: October 3 2006 20:48 | Last updated: October 3 2006 20:48

PartyGaming would have to negotiate a new credit facility with its banks within 30 days of President George W. Bush signing into law the anti-gambling bill that is driving the online gambling sector out of the US.

The negotiations have been triggered by a clause in its $500m (€392m) credit facility that allows its lenders to call in the loan in the event of a change in US law that materially affects the company’s position in the US.

The move comes as World Gaming, a UK-listed operator with more than 90 per cent of its revenues generated from the US, announced it might be in technical default of its loan conditions because of the US law.

Bankers said the US legal change was likely to trigger clauses in other online gaming companies’ credit facilities, although 888 Holdings said it had never taken out a loan.

As a result, most online gaming companies are likely to face higher borrowing costs.

PartyGaming, which aims to pull out of the US altogether, said it was relaxed about the negotiations, saying its strong cash position allowed it to draw down regularly from its banking facility and repay loans. It has around $10m drawn down from its current facility, negotiated in June with RBS, Dresdner Kleinwort, Bank of Scotland, West LB and Commerzbank.

PartyGaming said it would review its banking requirements.

One analyst said the renegotiation of loans would change the nature of deals in the sector, with paper deals likely to become the norm.

“No-one has got access to any real amount of debt, no-one is going to be able to raise any equity,” he said. However, as online gaming companies are highly cash-generative, most have not relied on borrowings to fund their expansion.

PartyGaming said it was cancelling its interim dividend, worth $115m, in order to “take advantage of the many attractive opportunities” that would emerge over the coming months.

According to documents filed with the SEC in July, World Gaming had bank debt of more than $30m at the end of June through a $40m facility with Barclays, of which $19.5m is due within a year.

The company has cash of just $7m. Barclays declined to comment.

Additional reporting by Neil Hume and Tom Braithwaite