Gala Coral close to £540m deal to shake off debt burden 05/10/2009

Jon Parker

GALA CORAL IS understood to be negotiating a financial restructuring that will see lenders write off £540m of loans in exchange for a major stake in the business.

The company, which owns Britain’s biggest bingo site, GalaBingo.co.uk, as well as a string of bingo halls and casinos and the betting outlet chain Coral, has been trying to raise funding to help it free up cash to invest in the business, which is restricted by debt.

Allowing for the money in the bank, the business has net debt of £2.5bn and earnings of £360m. Its 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.

As reported on EGRmagazine.com, Gala Coral in June asked investment bank Lazard, its long-standing adviser, to weigh up options for the cash drive, which could have included asking existing investors to inject more money into the group, or the partial debt-for-equity swap understood to be being discussed.

Gala Coral is owned by the private-equity houses Candover, Cinven and Permira, which last year pumped £125m into Gala Coral to and give the company more "headroom". However the three investors have since written down their £700m investment to zero, which made it less likely that they would have been willing to stump up more cash to inject into the company.

According to the Sunday Times newspaper yesterday, the three private equity firms are expected to agree to surrender up to half their stake under a restructuring deal being negotiated, which will be taken by a group of lenders led by two investment groups, Intermediate Capital and Park Square.

Gala Coral, which has not breached any of its lending agreements, has also drawn up a new business plan that would see it repay £550m to its senior lenders over the next three years and pay £500m in interest over the same period.

Contacted by EGRmagazine.com today, the company declined to comment.

As reported on EGRmagazine.com, Gala Coral fell sharply in this year’s Power 50 ranking of the industry’s leading operators, dropping 25 places to 36^th position in this year’s group due both to its debt and to the continued drag of high taxation levels and the UK smoking ban.

Don't miss out on egaming news: sign up for our free, daily Snapshot email. Or get the news as its breaks with the free eGaming Review RSS feed.

Don't miss out on egaming news: sign up for our free, daily Snapshot email. Or get the news as its breaks with the free eGaming Review RSS feed.

Posted: 05/10/2009