{"id":285065,"date":"2023-08-14T06:30:02","date_gmt":"2023-08-14T11:30:02","guid":{"rendered":"https:\/\/www.casino.org\/news\/?p=285065"},"modified":"2023-08-14T13:12:25","modified_gmt":"2023-08-14T18:12:25","slug":"espn-deal-supportive-of-penn-credit-outlook-says-moodys","status":"publish","type":"post","link":"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/","title":{"rendered":"ESPN Deal Credit Positive for Penn Entertainment, Says Moody\u2019s"},"content":{"rendered":"

Last week, Penn Entertainment (NASDAQ: PENN) announced it will pay $1.5 billion over 10 years to use ESPN\u2019s “ESPN Bet” brand on its online and retail sportsbooks. That’s while granting rights to the unit of Walt Disney (NYSE: DIS) to acquire a significant amount of its equity. Moody\u2019s Investors Service views the move as credit positive for the regional casino operator.<\/p>\n

\"Penn
A slide from a Penn Entertainment investor presentation. Moody’s says the casino operator’s credit outlook could benefit from a deal with ESPN. (Image: Penn Entertainment)<\/figcaption><\/figure>\n

The ratings agency acknowledges that Penn could face significant customer acquisition and marketing costs in the fourth quarter and into next year to kickstart ESPN Bet. But it added the alliance with ESPN<\/a> could pay long-term dividends for the gaming company.<\/p>\n

We expect a ramp-up period, which will also call for incremental spend for marketing, promotions and customer acquisition purposes,\u201d noted Moody\u2019s. \u201cAs a result, we expect PENN’s leverage to increase to 5.0x from 4.7x (company calculated net leverage). Those costs should come down over time as ESPN Bet matures, establishes, and gains market share. PENN believes its interactive segment has longer-term adjusted annual EBITDA potential of $500 million to $1 billion, depending on North American market share in online sports betting and iCasino.\u201d<\/p><\/blockquote>\n

The credit grader has a rating of \u201cB1,\u201d putting it well into junk territory, and a \u201cstable\u201d outlook on Penn\u2019s corporate debt. As of June 30, the Ameristar operator had $1.27 billion in cash and cash equivalents and debt of $2.68 billion.<\/p>\n

Ins and Outs of Penn\/ESPN Deal<\/h2>\n

Reportedly, Penn wasn\u2019t ESPN\u2019s first choice<\/a> for the marketing pact, nor its second. That\u2019s one reason sell-side analysts are divided on the agreement.<\/p>\n

\n

Another reason is that the casino operator shed Barstool Sports<\/em> for a mere $1, reselling it to founder David Portnoy. That happened just months after putting the finishing touches on the acquisition that valued the media property at $550 million. Some analysts believe Barstool<\/em> could be worth as much as $600 million, and while Penn has rights to 50% of the economics should Portnoy sell the company again, the look of not wringing any shareholder benefit out of the transaction is poor.<\/p>\n<\/div>\n

Portnoy claims he has no plans<\/a> to sell Barstool <\/em>again, indicating there are no near-term avenues through which Penn could benefit from its agreement with the media company. Additionally, Penn could give up a significant amount of its equity to ESPN.<\/p>\n

\u201cPENN will also grant ESPN about $500 million in warrants to purchase 31.8 million PENN common shares that will vest over 10 years,\u201d added Moody\u2019s. \u201cESPN could receive bonus warrants upon ESPN Bet meeting certain US online sports betting market share performance thresholds. ESPN will have the option to designate one nonvoting board observer, or after three years designate a board member subject to gaming regulatory approval and a minimum ownership threshold.\u201d<\/p>\n

Disney sold its interest in Penn rival DraftKings (NASDAQ: DKNG) for $90 million, a move that could be tied to the agreement with Penn.<\/p>\n

Penn Needs to Spend to Leverage ESPN Brand<\/h2>\n

While the ESPN brand is one of the most recognizable in the sports world, Penn still faces costs to adequately leverage that name.<\/p>\n

To date, Penn\u2019s been a bit player in terms of US sports wagering market share, though it hasn\u2019t spent on marketing on par with competitors<\/a> such as BetMGM, DraftKings, and FanDuel.<\/p>\n","protected":false},"excerpt":{"rendered":"

Last week, Penn Entertainment (NASDAQ: PENN) announced it will pay $1.5 billion over 10 years to use ESPN\u2019s “ESPN Bet” brand on its online and retail sportsbooks. That’s while granting rights to the unit of Walt Disney (NYSE: DIS) to acquire a significant amount of its equity. Moody\u2019s Investors Service views the move as credit […]<\/p>\n","protected":false},"author":46,"featured_media":243056,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[10,1074],"tags":[81903,80968],"acf":[],"yoast_head":"\nESPN Deal Supportive Of Penn Credit Outlook, Says Moody's<\/title>\n<meta name=\"description\" content=\"ESPN Marketing Pact Credit Positive for Penn Entertainment, Says Moody's.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"ESPN Deal Supportive Of Penn Credit Outlook, Says Moody's\" \/>\n<meta property=\"og:description\" content=\"ESPN Marketing Pact Credit Positive for Penn Entertainment, Says Moody's.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/\" \/>\n<meta property=\"og:site_name\" content=\"Casino.org\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/Casino.OrgNews\" \/>\n<meta property=\"article:published_time\" content=\"2023-08-14T11:30:02+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-08-14T18:12:25+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/penn2.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"578\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Todd Shriber\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@etfgodfather\" \/>\n<meta name=\"twitter:site\" content=\"@Casino_Org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Todd Shriber\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/\",\"url\":\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/\",\"name\":\"ESPN Deal Supportive Of Penn Credit Outlook, Says Moody's\",\"isPartOf\":{\"@id\":\"https:\/\/www.casino.org\/news\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/penn2.jpg\",\"datePublished\":\"2023-08-14T11:30:02+00:00\",\"dateModified\":\"2023-08-14T18:12:25+00:00\",\"author\":{\"@id\":\"https:\/\/www.casino.org\/news\/#\/schema\/person\/f4cecf70a5032bc4e60eb73fc86d4a85\"},\"description\":\"ESPN Marketing Pact Credit Positive for Penn Entertainment, Says Moody's.\",\"breadcrumb\":{\"@id\":\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.casino.org\/news\/espn-deal-supportive-of-penn-credit-outlook-says-moodys\/#primaryimage\",\"url\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/penn2.jpg\",\"contentUrl\":\"https:\/\/www.casino.org\/news\/wp-content\/uploads\/2022\/11\/penn2.jpg\",\"width\":1200,\"height\":578,\"caption\":\"A slide from a Penn Entertainment investor presentation. 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