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New ratings of Codere that, despite the Argentine crisis, maintains its forecasts


Madrid, September 11, 2019. As a result of the uncertainty generated in the markets following the results of the primary elections in Argentina, the rating agencies have reviewed their Codere ratings for the group's exposure to that market. In this context, the credit rating agency S&P has maintained its rating of B for Codere, a leading international company in the private gaming sector, although it will be monitored for the next six months (Credit-Watch Negative), as the group for the period of two years prior to the maturity of their bonds.

The arguments put forward by the agency respond to strictly technical criteria regarding the term of refinancing, balancing the uncertainty generated in Argentina with the favorable evolution of the company and its ability to face adverse scenarios, due to macroeconomic or regulatory circumstances, generating growth.

For its part, Moody's agency has downgraded Codere's rating from B2 to B3, maintaining a stable outlook, arguing the potential impact of the situation Argentina is experiencing after the last primary elections, on profitability and generation capacity. Group cash.

The company states that it does not share the decision adopted by Moody’s, understanding that the new report issued does not properly reflect the current situation, or the company's perspectives, because:

• This rating reduction does not take into account the recent communication of the company - (relevant fact of August 26) - informing about the effects of the situation in Argentina in its second quarter results and reaffirming its expectation of complying with the guidance of adjusted ebitda for 2019, which entails both a significant improvement in ebitda compared to the previous year, as well as the generation of positive free cash flow for this year.

• In the first six months of the year, the company has shown lower levels of non-recurring expenses and investments in maintenance and growth (capex), which improves the expectation of cash flow generation for the year. Consequently, and in contrast to the expectations of the rating agency, the company expects to generate a positive cash flow during 2019.

• The results at the end of June 2019 (and advanced on August 26), reflect that, both the company's ebitda and the adjusted ebitda, the geographical diversification of both and the cash generation, reach, by the middle of this year, its highest level since 2012, while net leverage is at a minimum of 2.7x.

• Likewise, Codere continues to implement its Transformation Plan within the company, digitizing its front and back offices, and activating levers capable of generating significant growth in adjusted ebitda in the coming years. In particular, this plan has allowed reducing exposure in Argentina, which has gone from assuming 131 million euros of adjusted ebitda (almost 50% of the consolidated), to around 65 million in 2019 (less than 25%), while that of the rest of the group has passed in this period of contributing 121 million euros to approximately 220, according to the guidance provided to the market for 2019.
In the context of the publication of the results of the first half of 2019, next Friday, September 13, the company will comment in depth on its data and expectations of cash flow generation based on the actual data of the second quarter of the year.

Codere expects that in the coming months the confirmation of the expectations of results made public by the company and the resolution of some of the uncertainties that today remain regarding the evolution of the macroeconomic scenario in Argentina, will contribute to progress in the process of debt refinancing, facilitating the review of decisions now made by rating agencies.

About Codere

Codere is an operator of the game, an international reference, with a presence in seven countries in Europe - Spain and Italy - and Latin America - Argentina, Mexico, Panama, Colombia and Uruguay, which operates more than 57,000 machines and has about 29,537 positions of bingo and more than 7,700 sports betting terminals in Latin America, Spain and Italy through points of sale that include 148 game rooms, 1,119 arcades, about 10,000 bars, 602 betting rooms and 4 racetracks. The Company also develops online game. www.grupocodere.com