Shares in beleaguered PartyGaming took a further battering today following a newspaper report which said it would have to negotiate a new loan facility with its banks within 30 days of anti-gaming legislation being approved.
Internet gambling stocks crashed on Monday after strict new laws to crackdown on online betting in the United States were unexpectedly approved by Congress at the weekend.
The value of the sector was halved and billions of pounds were lost as shares in the London-listed companies tumbled to their lowest ever levels.
Party Poker owner PartyGaming saw its stock slide 58% on Monday and a further 9% on Tuesday as it generates three-quarters of its business in the US.
Today, shares were down 5% or 2.25p to 38.5p after the Financial Times said a new loan facility would have to be negotiated after President George Bush signed into law the anti-gaming bill.
The paper reported the move was prompted by a clause in a $500m (€394m) loan agreement allowing its lenders to call in a loan in the event of an alteration in US law affecting the firm’s position in the country.
But a PartyGaming spokeswoman said: “We don’t see this as an issue.”
She said the loan was a revolving credit facility which the company can use according to its needs.
However, a broker note from ABN Amro warned that PartyGaming was likely to need funds to exit the US for restructuring and redundancies.
The fall in share price this week has cut PartyGaming’s value from £4.3bn (€6.3bn) to just £1.54bn (€2.2bn) – putting it in line to be relegated from the FTSE 100 Index at the next reshuffle in December.
It followed an unexpected decision by Congress to approve the controversial Unlawful Internet Gambling Enforcement Act.
The Bill bans banks and credit card companies from processing payments to online casinos – effectively outlawing internet gambling in the US and depriving companies of most of their income.
It took the City by surprise as it was thought that the Senate would not have time to add its approval to earlier backing in the House of Representatives.
But on Saturday the Bill was attached at the last minute to an unrelated piece of legislation aimed at enhancing port security and it is now expected to be signed into law by President George Bush within two weeks.
PartyGaming and 888 Holdings, which rely heavily on the US for business, said they will suspend business in the US indefinitely when the Bill becomes law.
The crash followed a turbulent few months for the sector which has been rocked by the recent arrests of BetonSports chief executive David Carruthers and Sportingbet chairman Peter Dicks in the US over alleged illegal internet gambling on sport under current laws.
The legality of internet gambling in the US has been a grey area for a number of years, with it generally considered to be outlawed by the 1961 Wire Act, which prohibits “the placing of bets or wagers on any sporting event or contest” via a “wire communication facility” such as a telephone.
However, it has not always been clear whether the internet constitutes a “wire communication facility” and whether poker and casino games such as blackjack constitute a “sporting event or contest”. It has also proved very difficult to police.