Lottomatica Group S.p.A. -- Moody's assigns a Baa3 to Lottomatica's EUR500M Sr. notes and affirms all other ratings; stable rating outlook

New York, November 28, 2012 -- Moody's Investors Service today assigned a Baa3 rating to Lottomatica Group S.p.A.'s (Lottomatica) proposed seven year EUR500 million notes. At the same time, Moody's affirmed Lottomatica's other ratings. The rating outlook is stable.

The notes will be guaranteed by GTECH Corporation, GTECH Holdings Corporation, GTECH Rhode Island LLC and Invest Games S.A. - all subsidiares of Lottomatica. The proceeds of the note issuance will be used in part to repay outstanding bank debt and for general corporate purposes including refinancing of debt maturities.

Rating assigned:

Lottomatica Group S.p.A.

EUR500 million five or seven year senior unsecured guaranteed notes at Baa3

Ratings affirmed: Lottomatica Group S.p.A. EUR750 million senior unsecured guaranteed notes due 2016 at Baa3

EUR500 million senior unsecured guaranteed notes due 2018 at Baa3

EUR750 million subordinated interest-deferrable capital securities due 2066 at Ba2

RATINGS RATIONALE

The Baa3 rating reflects the company's leading market position in the global lottery industry, good profitability (EBITDA margins exceed 30%), and a proven track record of winning and retaining lottery contracts. Ratings also reflect revenue concentration risk and a concern that the deteriorating economic environment in Italy -- where Lottomatica has significant earnings concentration -- may depress revenues and earnings over the next twelve months.

Lottomatica's Baa3 rating is currently one notch below the Italian sovereign rating of Baa2. Given the company's reliance on Italian operations for about 70% of EBITDA, it may not be able to insulate itself from the macroeconomic risks associated with Italy. It may be possible for Lottomatica's rating to exceed that of the sovereign by no more than one notch if the company maintains a good liquidity position, a diversified debt structure to help mitigate potential disruption in the capital markets for Italian issuers, the expected decline in earnings from Italian operations remains modest, the company's non-Italian operations continue to grow, and Lottomatica can cover its capital spending and dividend requirements from cash flow.

The Ba2 rating on the company's subordinated euronotes is two notches below Lottomatica's Baa3 senior unsecured rating reflecting (i) the existing securities' subordinated ranking in liquidation, and (ii) the issuer's option to defer interest payments on a cumulative basis if no dividends on ordinary and preferred shares have been paid in the preceding three months.

The stable rating outlook incorporates our expectation that Lottomatica's Italian operations may experience a mid-single digit decline in EBITDA in 2013 partially offset by a modest increase in EBITDA from GTECH and Speilo. Such a scenario Moody's believes would result in a slight deterioration in credit metrics with debt/EBITDA rising to approximately 2.9 times and EBITDA less capex/interest expense dropping to about 4.4 times versus 2.4 times and 6.1 times, respectively, as of September 30, 2012.

The company's ratings could be downgraded if its debt/EBITDA rises above 3.25 times for a sustained period, EBITDA-capex/interest expense drops below 2.5 times or retained cash flow to net debt declined below 10%. Additionally, rating pressure could develop if economic conditions in Italy worsen causing deterioration in Lottomatica's operations or if the sovereign rating of Italy were downgraded. Lottomatica's ratings could be upgraded if debt to EBITDA and EBITDA-capex/interest expense were to sustainably improve to below 2.5 times and above 5.0 times, respectively.

The principal methodology used in this rating was Global Business & Consumer Service Industry rating methodology published in October 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Lottomatica Group S.p.A. is a global operator and supplier of online lottery systems, is the sole concessionaire of the world's largest lottery in Italy, and has a growing presence in instant ticket printing, sports betting, and machine gaming. Lottomatica is majority owned (58.4%) by the De Agostini Group, a publishing, media, and financial services company.

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