Boyds Strong Financial Position Sets the Stage for Expansion in Regional Casinos Following FanDuel Stake Sale

• Boyd completed sale of 5% FanDuel to Flutter Entertainment last week
• Analyst says portion of proceeds will be used to reduce debt, boosting allure of other Boyd corporate bonds

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Boyd Gaming (NYSE: BYD) recently finalized the sale of its 5% stake in FanDuel to Flutter Entertainment (NYSE: FLUT), generating an impressive $1.758 billion. Boyd Gaming (NYSE: BYD) recently finalized the sale of its 5% stake in FanDuel to Flutter Entertainment (NYSE: FLUT), generating an impressive $1.758 billion. This substantial cash influx provides the company with significant capital to strengthen its core operations, particularly as it continues to compete and expand the influence of its various regional casinos. The windfall is primarily earmarked for debt reduction, a move that could significantly enhance the attractiveness of the company’s remaining corporate bonds while stabilizing its long-term position in the gaming market.

In a recent report, GimmeCredit analyst Kim Noland highlighted that after tax implications, Boyd could net around $1.4 billion from the sale. This capital influx is critical for reducing outstanding liabilities while also facilitating a return of capital to shareholders. Boyd is a leading buyer of its own shares within the gaming industry, substantially lowering its shares outstanding count.

Boyd’s strategic use of proceeds from the FanDuel sale to pay off debts, including amounts due under its revolver and term loan A, is expected to significantly improve lease-adjusted leverage; forecasts now suggest this might settle in the low 2x range following the transaction,” Noland comments.

Underlining the positive outlook, Boyd is expected to generate an estimated $450 million in cash flow, with corporate debts coming due in 2027, currently carrying a yield-to-worst of 5.1% and rated “outperform” based on current market trends.

Boyd Buffers Boost Case for Bonds

Boyd’s strong second-quarter performance and a 15% year-to-date stock price increase can largely be attributed to its minimal exposure to the Las Vegas Strip’s volatility.

Operating 10 gaming venues in Las Vegas, including Aliante, California, Cannery, Fremont, Gold Coast, Jokers Wild, Main Street Station, Sam’s Town, Suncoast, and The Orleans, Boyd offers a diversified portfolio. Additionally, they manage regional casinos across key states such as Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania.

“Boyd’s geographically diverse regional casinos primarily cater to local clientele and are essential destinations for Las Vegas’ local patrons as well as regional players in the Midwest and South,” Noland further remarks. “Compared to destination resorts such as the Las Vegas Strip, Boyd’s regional locations have generally performed better, as gambling revenue has suffered due to a decrease in visitors from Asian, Canadian, and Mexican markets.”

Boyd Has Compelling Projects in the Pipeline

Boyd has plans for exciting developments, which should provide additional value to both creditors and shareholders. However, the capital investments involved in these projects suggest that capital spending will remain elevated over the next couple of years.

Noland concludes, “Boyd is working on several large projects, particularly a Virginia venue costing around $750 million, which will need approximately $150-$200 million this year, as well as Cadence Crossing, estimated at $100 million.” These efforts indicate that capital expenditure is likely to remain strong for the foreseeable future, showing a commitment to growth and development.

The Virginia project is in collaboration with the Pamunkey Indian Tribe and will offer a gaming venue in Norfolk, while Cadence Crossing is expected to be positioned in the suburban landscape of Las Vegas, capitalising on favourable demographic trends.

Summary

Boyd Gaming’s recent strategic sale of its FanDuel stake and plans for debt reduction highlight the company’s proactive measures to fortify its financial standing. With a strong foothold in the Las Vegas local market and an array of upcoming projects, investors have every reason to feel optimistic about Boyd’s future performance. This blend of operational strength and prudent financial practices not only boosts Boyd’s attractiveness to investors but also makes its bonds a compelling consideration.

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