Gaming group could be broken up, report claims
Posted by Bev Freeman on 28 Jul 2009 at 08:07
The gaming group of Gala Coral could be dismantled and have its parts sold in order to generate cash for the private equity-owned business, it has been reported.
The Observer said that the plan appeared in documents drawn up by its main lender, the Royal Bank of Scotland.
According to the paper, the proposal was drawn up as deadlines for debts for the group approach, and as talk of restructuring gathers pace.
The Observer said Gala Coral is owned by Candover, Cinven and Permira and faces having to pay £80 million to its lenders by September and £150 million next year.
Gala coral has a reported £2.7 billion in debt of which the Royal Bank of Scotland has little exposure to, but is expected to play a crucial role anyway as it is the agent for all of the group's main debt holders.
The bank's plan seems to have been drawn up without the consultation of Gala Coral, according to the Observer.
The company has appointed the investment bank Lazard to examine restructuring ideas, including a partial debt-for-equity swap.
Quoted by the paper, Gala Coral said: "We are not looking to sell off assets or break up the group. We have £200 million on the balance sheet and we are not seeking an equity injection."
But Royal Bank of Scotland, the Observer adds, has been to a number of potential investors to invite them to make a bid for Gala Coral's casino, betting shop, bingo and online enterprises, or to buy a stake.
Furthermore, the paper claims to have seen a presentation by the Royal Bank of Scotland which has been centred potential investors, saying: "The company needs to address its debt burden and is considering a number of options to raise cash.
"Candover and Permira are financially strained and unlikely to be willing to inject more equity.
"There may be an opportunity for a new party to invest up to £250 million for a 'Non-controlling' stake in the company. [An] alternative is a spin-off of one of the company divisions."
The presentation also said that the £250 million investment would be "non controlling" to avoid activating change-of-control clauses in Gala Coral's debt agreements.
The Observer also reported that last April the three backers of gala coral put £125 million of rescue money into the group as part of a refinancing project. Following this all three rated down the value of their investments to zero and Gala Coral's "buyout debt is trading at deeply distressed rates on the secondary market".
