Paddy Power owner Flutter Entertainment is seeking backing from its lenders as it launches a last-ditch effort to reverse a more than $1.3bn (€1.1bn) fine that some of its subsidiaries were hit with in Kentucky.
n December, the Kentucky Supreme Court reinstated an $870m fine against units of The Stars Group, which last year merged with Flutter.
The fine, which now totals more than $1.3bn due to continually accruing interest, had been overturned by the Kentucky Court of Appeals in 2018. Last month, the Kentucky Supreme Court refused a petition by Flutter for a rehearing.
That leaves Flutter gambling that the US Supreme Court will reverse the fine. The company is applying for a stay in the Kentucky judgement while it makes an application to the US Supreme Court to hear its case.
The Supreme Court is not under any obligation to hear cases and it only accepts between 100 and 150 of the more than 7,000 cases it is asked to review every year.
The Commonwealth of Kentucky initiated legal action against certain subsidiaries of The Stars Group in 2010. It sought recovery of alleged losses incurred by residents of the state who played real-money poker on the PokerStars website between 2006 and 2011. PokerStars was bought by The Stars Group in 2014 and is now part of the Flutter Entertainment stable.
Soon after the Kentucky Supreme Court refused the petition for a rehearing, Flutter provided notices pursuant to relevant debt documents advising lenders that the denial of that petition would trigger an event of default if the company fails to pay the final judgement of the Kentucky Supreme Court, or if the judgement is not discharged, waived or stayed within required timeframes.
Ratings agency Moody’s said that on Monday this week, Flutter launched consent requests to amend and waive, as applicable, certain events of default under a term loan and senior unsecured notes that might arise from the Kentucky Supreme Court decision.
“Moody's considers the probability of obtaining a consent waiver from its debt holders as very high,” said the agency. “Moody's also estimates that the company's available sources of liquidity and strong credit metrics within the Ba1 rating mitigate the rating impact from the Kentucky legal proceedings.”
Flutter has indicated that it is confident that any amount ultimately paid will be a limited portion of the reinstated judgement and intends to dispute the Kentucky judgement.
