Progressive Gaming Drops After Downgrade

Traci Mangini of ThinkEquity Partners lowered Progressive's rating to "Accumulate" from "Buy" and cut its price target to $5 from $7.50.

On Thursday, the U.S. District Court for the Southern District of Mississippi denied Progressive's post-trial claims for relief from a $39 million verdict against the company. A suit, filed in 2002, alleged that the company illegally restrained trade and attempted to monopolize the proprietary table game market in the United States, according to Securities and Exchange Commission filings.

In addition to posting the bond, Progressive must grant a separate subordinated security interest in its assets for the remaining amount due.

Traci Mangini of ThinkEquity Partners said the bond amount is higher than was expected, and will hurt the company's efforts for capital structure improvements.

"While we remain optimistic about Progressive's chances to prevail in this more sophisticated court system, we believe this weakens its balance sheet and creates an overhang until there is resolution (potentially one year or more)," she wrote in a client note.

Goldman Sachs analyst Steven Kent said he was surprised by the timing of the news, since Progressive indicated a ruling was not likely before early 2008.

Kent said in a note that he wasn't sure how the company planned to maintain its capital structure since $45 million in debt needs to be repaid by August 2008 and Progressive recently announced a $50 million shelf offering.

He feared the ruling could shift management's focus, but said the company still has options and "generally requires minimal cash to operate."

Shares of Progressive Gaming International fell 90 cents, or 18.6 percent, to $3.93 Monday. Over the past 52 weeks, the stock has traded between $3.55 and $9.98.