Tabcorp Holdings Ltd's long-term credit rating has been downgraded a notch to BBB- by Standard & Poor's after the gaming giant announced it would pay $75 million for a 20-year extension to its retail betting monoploy in New South Wales.
The ratings agency said it had lowered the group's rating to BBB- from BBB, but its long-term rating outlook was stable.
Standard & Poor's credit analyst Paul Draffin said that the licence deal was "supportive of the group's "satisfactory" business risk profile" but the retail wagering business remained under significant ongoing competitive pressure from online peers.
"The downgrade reflects our expectation that Tabcorp's funding of recent license extensions, our revision of the hybrid equity content on Tabcorp’s hybrid notes to "intermediate" from "high" in March 2013, and continuing strong competition in the company's key wagering markets will cause the group’s financial risk profile to track below expectations for the previous 'BBB' rating in the next two years," Mr Draffin said.
He said the Australian wagering market continued to migrate toward lower-margin fixed-odds betting, which was tempering Tabcorp’s earnings growth.