Billionaire Johann Graf has never had to fight on so many fronts at the same time.
The ordinary-man’s gambling company, Novomatic, the 73-year-old Austrian butcher-turned-tycoon created four decades ago, is raking in smaller profits as the pandemic drives people away from slot machines in casinos from Las Vegas to Macau. His company is also battling allegations of corruption, its chief executive has left and it needs to refinance about 1 billion euros ($1.2 billion) in debt.
“Not only is it in a delicate sector, but it’s also facing several challenges at once,” said Alois Woegerbauer, the head of 3 Banken-Generali Investment, a Linz, Austria-based firm managing 10 billion euros in holdings, including Novomatic bonds. “Given the weaker sales outlook and the legal issues, the coming months will be decisive to see which direction Johann Graf and the company take.”
This article is based on court documents and interviews with more than 25 business partners, bond investors, lawyers, bankers and former employees who asked not to be identified discussing their relationship with Graf and the company. It seeks to capture the secretive billionaire’s rise and the challenges he now faces.
Graf, whose ascent is the stuff of Austrian folklore, started out as a butcher in post-World War II Vienna, living with his parents in a small apartment with a communal toilet down the hallway. Fifty years on, bankers working on a stock-market listing of Novomatic told Graf his net worth was close to 5 billion euros. The incredulous entrepreneur, polishing off a Viennese Schnitzel at his art-deco city-center guest house, jotted the number down on a napkin and put in his jacket pocket, according to an adviser who was present.
While the listing never happened, the cigar-smoking mogul’s fortune has expanded. It is estimated by the Bloomberg Billionaires Index at $6.6 billion -- after a $260 million drop this year -- making him the second-richest man in Austria behind Dietrich Mateschitz, the co-founder of energy drink Red Bull.
Graf’s wealth stems mostly from his full ownership of Novomatic, which runs gambling bars, counts Book of Ra, American Poker II and Sizzling Hot among its best-selling games and whose slot machines are installed in the world’s biggest casinos. The company has more than 2,000 gaming facilities across 50 countries.
Business has been hit hard as disposable incomes have shrunk. On a recent afternoon, staff outnumbered clients at the company’s flagship outlet in Vienna’s Prater amusement park. In a hall decorated with gold-colored Egyptian goddesses and mystic signs, four customers sat before screens watching horse races from Paris -- a far cry from its heyday when hundreds thronged to Europe’s biggest sports-betting and gambling bar each day.
The drop in business may cut earnings by up to 40% from about 700 million euros in 2019, according to S&P analyst Patrick Janssen. The yield on Novomatic’s 500-million-euro bond due in 2023 rose to more than 5% this year from 1% between 2016 and early 2020. The company also has to repay about 450 million euros in debt in the next 12 months. While its cash and credit lines of about 1.2 billion euros are “sufficient,” S&P says Novomatic needs to cut debt ratios to keep its rating.
Even before the pandemic roiled business, Novomatic had been caught up in a political scandal that rocked Austria last year. Then-Vice-Chancellor Heinz-Christian Strache was covertly filmed on the Spanish island of Ibiza saying “Novomatic pays them all,” as he spoke of political funding to a woman posing as a Russian donor.