Investing.com -- S&P Global Ratings has downgraded the credit rating of UK software company Playtech (LON: PTEC ) PLC from ’BB’ to ’BB-’ following the sale of gaming operator Snaitech SpA. The sale was completed on April 30, 2025, to Flutter Entertainment PLC for a total of €2.3 billion. The proceeds will be used to pay a €1.8 billion extraordinary dividend to shareholders, clear €150 million of outstanding senior secured notes due in 2026, and cover over €230 million in one-off costs and capital deficit.

The Snaitech sale and a less profitable agreement with major customer Caliplay in Mexico have led to a decrease in Playtech’s EBITDA margin. It is predicted to drop to about 12.2% in 2025 from 15.8% in 2024. The company’s decision to pre-pay its 2026 maturities will result in a decline in gross debt. However, the reduced EBITDA size will keep gross leverage close to 4x in 2025 before reducing to below 3x from 2026.

The Snaitech disposal has resulted in a less diversified revenue stream for Playtech due to a focus on business-to-business operations and higher customer concentration. In 2024, following the disposal, Playtech’s revenue dropped to €848 million, compared to €1.7 billion in 2023. The company will now be predominantly exposed to B2B operations, with less than 15% of revenue related to business-to-consumer operations.

Playtech’s profitability will decline due to its less profitable B2B business and revised agreement with Caliplay. S&P Global Ratings-adjusted EBITDA margin is now forecasted to be about 12% for 2025 and about 17% in 2026, compared to 20.7% in 2023.

With the proceeds from the Snaitech disposal, Playtech will pay an extraordinary dividend of €1.8 billion and clear €150 million of outstanding debt. The company is expected to have a cash balance of around €480 million by the end of 2025. Post-debt repayment, the company’s capital structure will consist of less debt, with only €300 million senior secured bonds due in 2028.

The stable outlook reflects S&P Global Ratings’ expectation of the company’s adjusted debt to EBITDA decreasing to below 3.0x in 2026 from about 4.0x in 2025. It also reflects free operating cash flow after leases of about €25 million in 2025 and €45 million in 2026. This will primarily depend on the evolution of dividends received from Caliente.

S&P Global Ratings could lower the rating if the company’s adjusted debt to EBITDA remains permanently above 3.0x or its forecast of free operating cash flow after leases deteriorates compared with the current base case. Conversely, a rating upgrade could be considered if Playtech expands its scale and diversification in operations such that its reliance on Caliente becomes significantly less pronounced in terms of EBITDA and cash flow.

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