| LONDON, June 19
LONDON, June 19 The debt refinancing of Codere's
senior credit facilities is the first stage of the
gaming company's restructuring which could see the circa 1
billion euro ($1.34 billion)of bondholders face a haircut of up
to 50 percent.
Last week the Spanish company, which has a significant
presence in Argentina and Mexico said it has reached a deal with
the debt funds Canyon Capital and GSO for a new 100 million euro
six month loan paying 750 basis points over Libor plus an
additional fee of 5 percent of what it borrows. This will
refinance 140 million euro of credit facilities due to mature
The refinanced senior credit facilities include a 60 million
euro revolver, 40 million euro in letters of credit and 40
million euro of surety bonds provided by Barclays, BBVA, Credit
Suisse and Houston Casualty Company.
In May, the struggling company mandated Perella Weinberg as
financial advisors. According to one source with knowledge of
the negotiations Perella was keen to table a proposal which
would see the banks refinancing the debt. Instead the banks sold
out to the funds at par.
"Perella Weinberg was trying to convince them to stay for
the next six months, this would have been a cheaper option for
the company," according to the source. "But the banks didn't
want to be part of the deal or part of a larger restructuring
going forward which could end up the wrong way for them."
Perella did not respond to requests for comment.
With immediate concerns over the refinancing of the senior
credit facilities relieved the plan now focuses on tabling a
consensual restructuring plan for the company's circa 1 billion
euro of outstanding bondholders, which currently comprises a 760
million euro 8.25% June 2015 issue and a $300 million 9.25%
February 2019 deal.
Codere missed a 30 million euro payment due last Friday on
the June 2015 Eurobond using a thirty day grace period. Moody's
said in a note on Wednesday that even if the notes are paid
before the end of the grace period the probability of a default
is very high.
The restructuring plan will involve a debt for equity swap
which could leave the current family founders stake in the
Codere reduced from around 68 percent to between 10-20 percent,
with bondholders taking a potential haircut of up to 50 percent,
according to the source.
An ad hoc committee of bondholders comprising GSO, Silver
Point, Monarch, Cyras Capital, Golden Tree and M&G is being
advised by Houlihan Lokey.
Due to the fact that Codere is a gaming company with a large
exposure to Argentina, bondholders will be under particular
pressure to agree an out of court consensual deal.
"The restructuring can't involve any court process because
it would lose it gaming licenses," said the source. "If it goes
to court in Spain it is game over -- they need a consensual
Codere's substantial exposure to Argentina has been a
significant risk factor, with round 45 percent of its EBITDA
coming from the Latin American country.
"The company will have value in four to five years but with
the current political and currency situation in Argentina the
amount of money Argentina can send to Spain will be limited,"
said one Madrid based restructuring adviser. "So basically
Codere will lose a large chunk of cash generation from its
Although restructuring advisers agree the Argentine
government is unlikely to expropriate Codere's interests in the
country as in the case of Repsol, there is the potential threat
that it could try to force a sale.
As a result it is hoped that a consensual deal can be agreed
within the next two to three months.
The June 2015 bonds are trading at 65 and the February 2019s
at 61, according to Tradeweb.
($1 = 0.7467 euros)
(Editing by Christopher Mangham)