Gaming technology provider GAN Ltd. (NASDAQ:GAN) secured much-needed refinancing from a few creditors — moves that will enable the struggling firm to achieve considerable savings on annual interest payments.
GAN stock was featured on the Nasdaq exchange. The company secured refinancing to reduce its interest expenses. (Image: Nasdaq)
GAN creditor Beach Point Capital is waiving certain defaults and covenants under their current agreement with the tech company. The lender is replacing an interest coverage ratio with a $10 million liquidity agreement, which will be examined on a quarterly basis.
Sega Sammy Holdings will enter an assignment and acceptance agreement with Beach Point, making it the new creditor on the term loan, in addition to lending GAN an extra $12m to cover certain fees to Beach Point and for general business purposes,” wrote Macquarie analyst Chad Beynon in a note to clients today.
He also noted that Sega Sammy will reduce the interest rate on GAN’s term loans to 8% from 14%, resulting in $2 million in yearly savings on interest costs.
Why This Matters
Formerly known as GameAccount Network, the company supplies software-as-a-service (SaaS) solutions for iGaming and sportsbook operators.
GAN debuted on the US stock market nearly three years ago and while there was initial enthusiasm for the stock, that has since faded as the shares have fallen 64.68% over the past year. In early 2021, the stock was close to $32. Now, it is around $1.60. With this news, investors will welcome any positive developments and the credit agreements could help.
“More importantly, we look at this new agreement positively, as it removes liquidity and covenant concerns, which we believe were a drag on the stock recently, and could suggest a new strategic partner in Sega Sammy going forward,” added Beynon.
The analyst has an “outperform” rating on GAN with a 12-month price target of $5, meaning the shares would need to more than triple from current levels to reach it.
GAN Credit Moves Could Support Strategic Review
Earlier this year, Ireland-based GAN announced it is initiating a strategic review “to evaluate options available to expedite our path to improved profitability metrics and a more attractive return profile.”
It remains to be seen if this will result in asset divestments or an outright sale of the company, but GAN’s market capitalization of $73.18 million makes it easily consumable for any number of potential buyers. Macquarie’s Beynon noted the aforementioned refinancing moves could encourage the company’s strategic review process and the stock is heavily discounted.
“Furthermore, we view the deal as a crucial first step towards a potential asset sale. As a reminder, GAN announced the commencement of a strategic review process during 4Q earnings,” concluded the analyst. “At ~$70m market cap, we believe there is value in recent contracts, embedded tech, the B2C business (following recent write-downs) and iGaming exposure. However, ongoing delays/reductions to the company’s revenue and EBITDA goals have caused shares to remain at substantially under 1x EV/sales.”