Why Everi Holdings Inc Stock Is Surging Today

By Jordan Wathen Markets Fool.com

What happened

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Shares of Everi Holdings Inc (NYSE: EVRI) are trading higher by about 17% as of 10:45 a.m. EDT Monday after the company released its preliminary first-quarter 2017 results and announced it is seeking to refinance some of its outstanding debt.

So what

Everi Holdings is seeking to refinance $335 million of senior secured notes due in 2021, and its first lien term loan with a current balance of approximately $462.3 million, which is due in 2020. The company believes that a refinancing will "lower its annual cash interest expense" and "extend its maturity schedule."

Preliminary first quarter 2017 results

Figure

Low

High

Revenue

$233 million

$238 million

Net loss

$6 million

$4 million

Adjusted EBITDA

$52 million

$54 million

Source: 8-K filed with the SEC.

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The company's units include Everi Games Holding and Everi Payments. The Everi Games unit creates video and mechanical games for Native American and commercial casinos. Everi Payments manages ATMs and provides other payment solutions for the casino industry.

Michael Rumbolz, president and Chief Executive Officer of Everi, said, "Our preliminary 2017 first-quarter results includeyear-over-year revenue and adjusted EBITDA growth for bothour Games and Payments segments,which reflect the Company's continued successful execution against its strategic priorities."

Image source: Getty Images.

Now what

Interest expense represents one of Everi Holdings' largest expenses at $99.2 million for the full 2016 fiscal year, which piled on top of an operating loss of $118.6 million last year. The senior secured term loan carried a rate of 6.25% (LIBOR plus 5.25%), while the senior secured notes have a fixed rate of 7.75%. Senior unsecured notes, which are not expected to be refinanced, carry a rate of 10% per year.

Taking advantage of lower credit spreads to refinance and extend the majority of its outstanding debt could be an immediate earnings driver for the company. Given its financial leverage -- approximately $1.15 billion of debt versus the current equity market value of $367 million -- it's not surprising to see a double-digit move in the company's stock on Monday.

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Jordan Wathen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.