Belarussian Soccer Is No Substitute for Sports Fans’ Betting Fix

(Bloomberg) --

European sports betting firms are turning to the lesser-known thrills of Nicaraguan soccer, Ukrainian table tennis and Chinese baseball in an effort to keep punters’ cash rolling in.

Denied their usual fodder by the lockdowns--from soccer action in Spain’s La Liga to the U.K.’s Grand National horse race--gaming firms are searching for ways to prop up revenue.

The lack of mainstream sport deals an additional blow to companies that were in some cases already heavily indebted, having stacked up debt from the leveraged loan and bond markets. While most sectors of the leisure industry are taking a hit, the longer-term impact on gaming companies depends on their level of exposure to in-person betting activities, like casinos.

Codere, for example, a Spanish company which has seen its gaming halls shuttered across Europe and Latin America, has had to defer payment of interest on its bonds. While online betting is only a small part of its business, it’s also had to become creative with its offerings to keep that revenue stream flowing.

“We have started to actively offer bets on the few sports that are still active, such as table tennis, hockey, esports, tennis and football, but all of them in leagues or competitions with a very low profile, such as the Belarussian or Nicaraguan football leagues,” a company spokesman wrote via email.

Others in the sector are also suffering. GVC Holdings, parent company of sports betting firms Ladbrokes Coral Group Plc and bwin Interactive Entertainment AG, expects an impact on its core earnings of 50 million pounds ($63 million) per month, it said in an early-April trading update, half its original estimate.

“While we have seen modest increases in betting on the few professional sports still operating, such as Australian horse racing, the reality is that this doesn’t come near to compensating for the cancellation of the vast majority of the sporting calendar,” a GVC spokesman wrote in an emailed statement.

The sudden halt in sports competitions has also dealt a blow to other industries.

Audiovisual producer Mediapro, which is the host broadcaster of Spain’s La Liga, has taken a hit to its business and was downgraded to six notches below investment grade this week. It has, though, seen a boom in eGames and eSports, in which the company is a leader in competition organization and content distribution, a spokeswoman wrote by email.

Soccer Fix

For investors in companies hit by the sports shutdown, who have seen the value of their bonds and loans plummet, the hope is that some European soccer games could start to resume by mid-June, even if matches are played to empty stadia.

“As things open up again, we think football may come back slightly earlier, initially behind closed doors, whereas pubs and clubs will be on the later end,” Tom Ross, a portfolio manager at Janus Henderson Group Plc, who manages $3.3 billion of assets said. “People are waiting to gain access to sport again.”

Funds managed by Janus Henderson hold bonds issued by the media rights businesses of Inter Milan and AS Roma, according to data compiled by Bloomberg.

When major sports events return, sports betting companies are expected to see most of their business come back, according to Wolfgang Felix, founder of credit opportunities specialist Sarria. “Betting on horse racing, for instance, has an ardent following that will go back to bet on-site,” he said.

Companies with a strong on-line presence will also benefit greatly when competitions resume, especially if the public has to watch it on the TV or on-line. “If they’re on-line, be sure they will be getting ads to bet on-line,” he added.

And beyond the immediate impact on gaming and media rights companies, the resumption of sport could play a role in the broader recovery, by reconnecting people with their pre-lockdown selves, according to Martin Horne, head of global public fixed income at Barings.

“Part of minimizing the damage to the economy is for consumers’ head space to start to return to normality,” he said.

©2020 Bloomberg L.P.