Intralot and Rating Agencies

All,

Following a few downgrades (moody’s again yesterday), the company released a statement (attached) with the following key messages:

a) The coupon next week will be paid. We are quite frankly aghast at the suggestion that this was subject to debate. The company still has sufficient resources to pay its coupon and failure to do so would wreck havoc before the company has had a chance to find a solution or make a proposal. The order of events we are anticipating is 1) sale of Gamenet Stake, 2) sale of another one or two markets. 3) a proposal made from a position of (relative)v strength. The idea that the coupon would not be paid sounds far fetched to us.

b) The company is admitting a liquidity squeeze - which the market seems to have begun to pick up on. We have heard funds pondering the possibility of a cash pay-out to reduce the 21s. But that is also not going to happen - because the liquidity is needed in the business. More likely, it will form part of a security package. Another implication of this admission is probably that the company will seek to make a proposal sooner rather than later. Thus we feel the time to take a position is coming.

c) The company points to its continued license for Bilyoner. At this point we are doubtful about the future of this arrangement. This license is - according to Intralot - going to materially increase in value and it’s now with a competitor. So as stated before, our base case is in fact that Intralot will lose this license too.

Wolfgang