Casino and media conglomerate Affinity Interactive has engaged investment bank Moelis & Co. to facilitate discussions with bondholders. The company is currently exploring ways to navigate its escalating debt pressures. This strategic move underscores Affinity’s attempt to stabilize its operations as it grapples with financial distress and creditors grow increasingly concerned about its rising debt ratios.
Bondholders, facing mounting pressure, have sought legal counsel from Akin Gump Strauss Hauer & Feld LLP, a law firm renowned for its expertise in corporate restructurings and Chapter 11 proceedings. This decision reflects the apprehension among investors regarding Affinity’s financial trajectory, as they worry about potential debt arrangements that might devalue their existing bond holdings, as reported by Bloomberg.
In parallel with its collaboration with Moelis, Affinity has enlisted the support of Macquarie Group Ltd. to identify viable assets for sale. The company is contemplating divesting certain properties, which may include real estate holdings or digital gaming ventures, such as its betting and media outlet, Daily Racing Form. These deliberations follow previous unsuccessful attempts to liquidate certain assets.
Over the past year, Affinity’s financial hurdles have become increasingly pronounced. According to market data, the company’s senior secured notes, maturing in 2027, are currently trading at less than 50% of their original value.
Credit rating agencies have also flagged Affinity’s financial instability. In April, Moody’s downgraded Affinity’s credit rating to Caa1, while S&P Global Ratings reduced it to CCC+. These downgrades highlight decreased earnings and rising expenses. Analysts point to a troubling increase in the debt-to-EBITDA ratio, which has surged from 7.8 times in 2023 to approximately 11.7 times by the end of 2024.
Z Capital Group’s private equity division owns Affinity, which operates several casinos across Nevada, Iowa, and Missouri. Notable properties under its management include Silver Sevens Hotel & Casino in Las Vegas, Primm Valley Resort & Casino, and Buffalo Bill’s in Primm.
In a bid to generate liquidity, the company completed the sale of Rail City Casino in Sparks, Nevada. This transaction, however, reduced its earnings base, highlighting a broader challenge faced by mid-sized regional gaming operators in a capital-intensive environment. Industry experts suggest that Affinity’s exploration of asset sales or restructuring initiatives mirrors the broader fiscal challenges confronting similar companies in today’s demanding market landscape.
Affinity’s current debt instruments are trading at distressed levels, reflecting limited refinancing options. The company’s next steps will be crucial in determining whether it pursues a targeted restructuring or implements more comprehensive operational changes to regain financial stability.
Meanwhile, some market observers offer a more optimistic outlook. They argue that Affinity’s strategic partnerships and asset management decisions might eventually pave the way for a financial turnaround. By focusing on core assets and realigning its business strategy, Affinity could potentially emerge stronger in the long run.
However, critics caution that ongoing high leverage and economic uncertainties could exacerbate Affinity’s financial woes. They point out that the gaming industry, while resilient, is susceptible to economic cycles, which could influence consumer spending and, by extension, casino revenues. As Affinity navigates these turbulent waters, its ability to adapt and innovate could be crucial in steering the company back to profitability.
In an industry where adaptability often determines success, Affinity Interactive stands at a crossroads. The company’s leadership is faced with critical decisions that will not only impact its immediate financial health but also its long-term viability. As the situation unfolds, stakeholders remain vigilant, aware that decisive action is necessary to secure Affinity’s future amidst a challenging economic landscape.
