Amaya Inc. Reaches Deferred-Payment Agreement for $200M of PokerStars Purchase

Amaya Inc., parent company of online-poker market leader PokerStars and sister brand Full Tilt Gaming, announced on Monday that it had reached a deferred-payment agreement with the former owners of Rational Group, the company from which Amaya purchased all assets of the Stars and Full Tilt brands back in May of 2014.

That original, highly-leveraged purchase of the Rational Group’s assets included portions of both immediate cash and deferred payments, and it appears that at least a mild cash shortage at Amaya prompted the discussion with the former Rational Group owners.  A deferred payment of US $197.7 million was due on February 1st, 2017, under the initial terms of the deal, but that will now be pushed back in an indefinite manner, to be paid off throughout the balance of 2017 through available cash.

amayaThe slight reworking of the deal allows Amaya to continue its operations without resorting to a larger financial restructuring or from issuing additional corporate stock.  That latter option, which would likely have trimmed Amaya’s stock price, was one of the remedies specifically called for under the terms of the 2014 deal.

The former owners of Rational Group are the father-and-son co-founders of PokerStars, Isai and Mark Scheinberg, plus a handful of other associates of the two that held prominent stakes in the closely-held, privately-owned company.  Neither the Scheinbergs nor any of the other former Rational Group owners were mentioned by name in Amaya’s Monday announcement.

Amaya clearly preferred a “non-dilutive” solution to meeting its February 1st payment deadline.  As the company’s statement declares, “Amaya believes this is the least expensive and most flexible financing option at this time as it avoids, among other things, incurring additional term debt, amendment fees and associated costs and expenses.”

According to Rafi Ashkenazi, Chief Executive Officer of Amaya Inc., “We believe that our current plan speaks to the strong cash flow generation of our business model and will allow us to continue investing in the success of our business while meeting our pre-existing contractual obligations to the former owners. Based on our operations and performance in 2016, we are confident in our ability to repay the balance of the deferred purchase price in a timely manner.”

Amaya’s announcement confirmed additional specifics about the reworked payment, including that Amaya will pay the Scheinberg-led group, in advance, three months’ worth of non-refundable late fees as allowed for in the original sale terms.

As mentioned, seeking an additional loan to over the waiting $197.7 million bill was among the options Amaya could have pursued, but chose not to.  According to the company’s statement, “the former owners have agreed not to enforce during 2017 their right under the original merger agreement to cause Amaya to use commercially reasonable efforts to issue equity to finance any outstanding balance of the deferred purchase price.”

Amaya did manage to make its last scheduled payment to the former Rational Group owners, a $200 million payment made in November of 2016.  Though the market could interpret the deferred-payment deal as a sign of cash-flow troubles at Amaya, the fact that the November payment was made on schedule appears to have alleviated most concerns.  Amaya Inc.’s share price actually climbed on Monday following the agreement’s announcement.  That share price slid back some on Tuesday, essentially leaving the company’s valuation unchanged since before the deal was announced.

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