Boyd Gaming in Good Financial Shape After FanDuel Sale

Last week, Boyd Gaming completed the sale of its FanDuel stock to Flutter Entertainment, giving the latter a 100% share in the mobile sports betting behemoth. However, the cash Boyd raked in has given the gaming and hospitality company robust financial health from an analyst’s perspective.

Boyd Buoyed by Sale

Boyd Gaming generated $1.758 billion from its sale of 5% of US mobile sports betting leader FanDuel to its parent company, Flutter Entertainment. After taxes, the regional gaming company secured approximately $1.4 billion to be earmarked for its corporate coffers. However, that money will be used to reduce debt and reinvigorate the financial health of its company, much to the delight of shareholders.

GimmeCredit analyst Kim Noland stated, “Boyd’s use of FanDuel proceeds to repay debt, including the outstanding balance under its revolver and term loan A, will result in an improvement in lease-adjusted leverage that we now estimate in the low 2x range pro forma the transaction.”

The company has announced loan repayment and shareholder wealth as its main objectives after receiving the proceeds from the sale. The company’s corporate debt is maturing in 2027, and it now has $450 million in cash flow to keep the company vibrant and the stock price high.

Strip Aversion

Although Boyd Gaming is a Las Vegas-based gaming company and is operating 10 casinos on its home turf, including Aliante, California, Cannery, Fremont, Gold Coast, Jokers Wild, Main Street Station, Sam’s Town, Suncoast, and The Orleans, it does not have the same reliance on tourism that many of its local competitors do.

The downtown district and areas outside the Las Vegas Strip, in Nevada, attract locals who frequent the casinos due to their budget-friendly costs and affinity for catering to their regular clientele. Therefore, the tourism drop on the Strip affects the pricey resorts like the Wynn, Venetian, and Caesars much more than it does Nevada’s other properties.

Spreading Out Across Regions

Moreover, Boyd Gaming is diverse and owns casinos in plenty of US states: Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Ohio, and Pennsylvania. These markets rely on locals who may be scaling back vacation plans to gambling destinations like Las Vegas, but will continue to patronize their local casinos.

“Boyd’s geographically diversified regional casinos provide mostly drive-to destinations for its core customers in the Las Vegas ‘locals’ and Downtown markets as well as other regional gaming casinos in the Midwest and South,” adds Noland. “The regional locations have fared better with gamblers than some destination resorts like the Las Vegas Strip, where gaming win has been impacted by a drop in visitors from Asia, Canada, and Mexico.”

Future Expansion Plans and Capital Investment

Although Boyd has plenty of cash right now, it has several irons in the fire to expand its gaming footprint that will require capital investment in the future. The allure of these projects will determine whether investors are in it for the long haul or willing to take their money and run.

“Boyd has several large projects in development, notably the Virginia project at a total cost of $750 million that will require $150-$200 million this year and Cadence Crossing slated at $100 million,” concludes Noland. “Investment projects will keep capex elevated for the next two years.”