EFTA01385359.pdf

3 January 2018 HY Corporate Credit HY Multi Sector.Media. Cable & Satellite We believe the current yield of the IGT 6.5% Senior Secured Notes due 2025 ($112.3, 4.4% YTVV, 199bps STW) is attractive on an outright basis given the modest leverage, strong collateral and free cash flow generation capability. Thus, we continue to rate these bonds as a Buy. For 2017, we estimate IGT to report adjusted EBITDA of $1.67 billion (-5.0% versus $1.76 billion) on revenue of $4.82 billion (-1.0% versus $4.87 billion). After factoring the impact of $600 million of capital expenditures, cash interest of $435 million, cash taxes of $325 million, dividends of $162 million, upfront payments (includes S&W) of $96 million, distribution to partners of $140 million and $995 million in asset sales proceeds (includes Double Down), we project total cash flow at $902 million by year-end 2017. Using our projection of $7.78 billion of debt and a $390 million cash balance, we estimate that IGT will end 2017 with a gross leverage of 4.7x and a net leverage of 4.4x. For 2018, we estimate IGT to report adjusted EBITDA of $1.71 billion (+2.5% versus $1.67 billion) on revenue of $4.79 billion (-0.5% versus $4.82 billion). After factoring the impact of $600 million of capital expenditures, cash interest of $395 million, cash taxes of $275 million, dividends of $162 million, upfront payments of $566 million, and distribution to partners of $150 million, we project total cash burn at $443 million by year-end 2018. Using our projection of $8.22 billion of debt and a $390 million cash balance, we estimate that IGT will end 2018 with a gross leverage of 4.8x and a net leverage of 4.6x. 'Exhibit 3: International Gaming Technology ($ Millions) 2015 (A) 2018(A) L1M 2017 (E) 2018 (E) Adjusted UEDA $1,705 $1.755 $1,848 $1,885 $1.705 Less: Capital Expenditures 403 557 738 600 600 Less:Cash interest 460 451 439 435 395 Less: Cash Taxes 199 183 207 325 275 Less: Dividends 210 161 153 162 162 Less: Distribution to partners 60 68 119 140 150 Less: Net upfront payments 0 409 228 96 566 Plus: Asset sales 231 186 1,122 995 0 Res Cosh Flow $604 $112 7663 $902 ($443) Toubl Debt $9499 $9.005 $7,778 $7,778 $8.221 Cash 627 294 300 390 390 Leverage Sox 4.8x 4.7x 4.7x 4.8x Net Leverage 4.13x 4.4x 4.5x 4.4x 4.8x Coverage 3.7x 3.9x 3.7x 3.8x 4.3x Sans OrPri MO ()anent beit Downside risks include: (1) declining industry fundamentals; (2) the loss of lottery contracts; (3) the use of free cash flow for activities other than debt repayment; and (4) unfavorable FX impact. MGM Resorts International. While MGM reported solid Q3'17, we believe that investor focus was on management's commentary regarding the impact of the tragic events of 10/1/17. Management noted that bookings declined immediately after October 1 because the company suspended its outbound marketing programs. Management also noted that they saw a spike in non- group cancellations (more than double than what they normally see). Management noted that these cancellations progressively subsided by mid- October and the booking pace returned to normalized levels after the company resumed its marketing efforts. Of importance, Mandalay Bay was the Page 84 Deutsche Bank Securities Inc. CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0086643 CONFIDENTIAL SDNY_GM_00232827 EFTA01385359