Bally's Corp 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates and foreign currency exchange rates. We are exposed to changes in interest rates primarily from variable rate long-term debt arrangements and foreign currency risk attributable to our operations outside of the US. Inflation generally affects us by increasing our cost of labor. Bally’s does not believe that inflation had a material effect on our business, financial condition or results of operations during the period from February 8, 2025 to March 31, 2025 (Successor), the period from January 1, 2025 to February 7, 2025 (Predecessor) and the three months ended March 31, 2024 (Predecessor). Interest Rate Risk As of March 31, 2025 (Successor), interest on borrowings under our credit facility was subject to fluctuation based on changes in short-term interest rates. On March 31, 2025 (Successor), we had $2.02 billion of variable rate debt outstanding under our Term Loan and Revolving Credit Facilities and $1.99 billion of unsecured senior notes. Based upon a sensitivity analysis of our debt levels on March 31, 2025 (Successor), a hypothetical increase of 1% in the effective interest rate would cause an increase in interest expense of approximately $20.2 million over the next twelve months while a decrease of 1% in the effective interest rate, not to exceed the interest rate floor, would cause a decrease in interest expense of approximately $20.2 million over the same period. We evaluate our exposure to market risk by monitoring interest rates in the marketplace and we have utilized derivative financial instruments to help manage this risk. As part of the Company’s risk management and hedging program, the Company utilizes interest rate swaps and collars used to hedge and offset, respectively, the variable interest rates on the credit facility as described in Note 11, “ Derivative Instruments ” to our condensed consolidated financial statements presented in Part I, Item 1 of this Quarterly Report on Form 10-Q. We have not historically utilized derivative financial instruments for trading purposes. We do not believe that fluctuations in interest rates had a material effect on our business, financial condition or results of operations during the period from February 8, 2025 to March 31, 2025 (Successor), the period from January 1, 2025 to February 7, 2025 (Predecessor), and the three months ended March 31, 2024 (Predecessor). 61 Foreign Currency Risk We are exposed to fluctuations in currency exchange rates as a result of our net investments and operations in countries other than the US. A vast majority of our revenues are from the UK market and are conducted in British Pound Sterling (“GBP”) and are therefore susceptible to any movements in exchange rates between the GBP and US Dollar. Foreign currency transaction losses for the period from February 8, 2025 to March 31, 2025 (Successor), the period from January 1, 2025 to February 7, 2025 (Predecessor) and the three months ended March 31, 2024 (Predecessor) were $1.6 million, $0.2 million and $2.8 million, respectively. Movements in currency exchange rates could impact the translation of assets and liabilities of these foreign operations which are translated at the exchange rate in effect on the balance sheet date. We have utilized operational hedges or forward currency exchange rate contracts, as well as derivative financial instruments, such as cross currency swaps, to manage the impact of currency exchange rate fluctuations on earnings and cash flows.