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Rating Action:

Moody's downgrades William Hill to B1; outlook negative

17 Jun 2021

London, 17 June 2021 -- Moody's Investors Service ("Moody's") has today downgraded William Hill plc's ("William Hill") corporate family rating (CFR) to B1 from Ba3, the probability of default rating (PDR) to B1-PD from Ba3-PD, and the instrument ratings on the GBP350 million guaranteed senior unsecured notes due 2026 and GBP350 million guaranteed senior unsecured notes due 2023 to B1 from Ba3. The outlook on all ratings was changed to negative from ratings under review.

This concludes the review for downgrade initiated by Moody's on 6 October 2020.

RATINGS RATIONALE

Today's action was prompted by the completion of Caesars Entertainment, Inc.'s (Caesars) acquisition of William Hill on 22 April 2021, and the evolving expectations of the impact on William Hill's financial metrics as Caesars finalizes the separation and divestment of William Hill's non-US businesses. Moody's estimates that William Hill's standalone leverage of 4.5x for FY 2020 (on a Moody's-adjusted basis) will remain broadly flat in 2021 at current debt levels, however considerable uncertainty exists around the company's future capital structure, and leverage could rise materially. The acquisition has also negatively impacted William Hill's standalone business profile because it no longer benefits from the diversification and opportunities afforded by the US joint venture, and the separation process could temporarily increase costs. The action is also driven by Moody's expectation of a likely weaker governance structure going forward, including a higher tolerance for leverage.

The B1 rating is also constrained by (1) the company's limited geographic diversity, with the UK contributing 74% of net revenue in 2020, although this is reducing with the European expansion through Mr. Green & Co A.B. (MRG); (2) its mature land-based retail business which has reduced by around 30% on like-for-like basis and weakened its competitive position; (3) the volatility of sports results, and; (4) the ongoing risk of adverse regulatory change and tax increases, particularly in the UK.

William Hill's B1 CFR benefits from the company's (1) relatively strong positions in the UK retail betting industry; (2) significant opportunity for online growth in Europe and internationally through MRG; (3) strong brand name and the retail segment's high barriers to entry.

The negative outlook reflects the uncertainty surrounding William Hill's future ownership, indebtedness, and scope and scale of the business once the separation from Caesars has been finalized.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONSIDERATIONS

In terms of governance, William Hill is no longer a publicly listed company, and uncertainty exists around its future governance structure. Its ownership by Caesars exposes it to the risk appetite of a more highly leveraged company. As noted previously, Moody's expects a likely weaker governance structure going forward, including a higher tolerance for leverage, and Moody's has also therefore lowered the financial policy factor score to B from Ba in the company's Rating Methodology scorecard.

LIQUIDITY

Moody's believes the company's liquidity profile will be at least adequate for its near-term needs going forward, although it has been weakened by the cancellation of its revolving credit facilities when the Caesars acquisition completed on 22 April 2021. There are no material debt maturities before 2023.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Whilst there remains considerable uncertainty in the short term, the outlook could be stabilized if the separation from Caesars is finalized and the resulting financial metrics are still considered commensurate for a B1 rating by Moody's.

Upward pressure is unlikely in the near term, but could occur if (1) Moody's adjusted debt to EBITDA ratio is maintained sustainably below 4.5x; (2) Moody's adjusted retained cash flow to debt stays well above 5% and the company generates consistent meaningful free cash flow, and (3) there is certainty about the future ownership and the company adopts a clear conservative financial policy.

Downward pressure on the ratings could occur if (1) Moody's adjusted debt to EBITDA rises sustainably above 5.5x; (2) the company fails to generate free cash-flow and/or there is a material deterioration in its liquidity risk profile; (3) its business profile weakens further as part of the Caesars separation process; or (4) adverse regulatory or taxation changes are expected to have a material adverse effect on the company.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Gaming Methodology published in October 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1244702. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

CORPORATE PROFILE

Established in 1934, William Hill plc is a leading sports betting and gaming company active in the retail and online segments that operates predominantly in the UK.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Kristin Yeatman
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Peter Firth
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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