Gala Coral to launch £200m cash drive 15/06/2009
Jon Parker
Gambling giant Gala Coral is trying to raise £200m of funding to help it through a looming cash crunch.
The company, owner of Britain’s biggest bingo site, GalaBingo.co.uk, as well as a string of bingo halls and casinos and the bookie chain Coral, wants to free up cash to invest in the business.
The company has asked investment bank Lazard, its long-standing adviser, to weigh up options for the cash drive. These could include a partial debt-for-equity swap, or for existing investors to inject more money into the group.
While trading is moderately healthy, debt obligations will not allow the group to access the £200m it has in the bank, as its loan agreement states that debt must not exceed 7.25 times its earnings.
Allowing for the money in the bank, Gala has net debt of £2.5bn and earnings of £360m. One option would be for holders of the ‘mezzanine’ debt of about £500m to convert some of that into shares, reducing the debt and thus freeing up bank funds.
Gala Coral is owned by private equity houses Cinven, Permira and Candover, which last year pumped £125m into Gala Coral to and give the company more "headroom". One option for raising the cash would be to bring in a new equity investor, while another would be for the businesses to simply inject more capital.
However the three investors have since written down their £700m investment in Gala Coral to zero, and it is unclear whether they would be willing to stump up more cash to inject into the company.
As reported by eGaming Review, Permira boss Damon Buffini resigned from the board of fund management firm SVG after SVG’s value was hit hard by the investment of most of its £3.7bn portfolio in Permira. Another option is for the group to spin off a division.
As reported on
EGRmagazine.com, full year results for Gala Coral showed it was still being affected by the smoking ban in the UK, which it said was the main reason behind the year-on-year fall in group earnings before interest tax, debt and amortisation (EBITDA), which fell 10% to £362m in 2008 (
more).
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Posted: 15/06/2009
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