MADRID Jan 2 Spanish gaming group Codere
said on Thursday it is seeking protection from
creditors and starting talks to avoid insolvency, after
struggling to keep up with debt payments in recent months
because of higher tax bills and other costs.
The company is the latest in Spanish to run into trouble
even as the country slowly emerges from recession, with
bankruptcies handled in court in 2013 up 15 percent from the
year before, according to official data.
Codere's problems, however, stem mainly from its overseas
businesses. The company blamed its cash shortage on the closure
of several gaming outlets in Mexico, license renewal costs in
Argentina and tax increases in various countries.
Codere had 1.27 billion euros ($1.73 billion) of debt at the
end of last September, according to company filings, including
three bond issues and other loans. It has up to four months to
reach a deal with banks and investors.
The loss-making company made several late payments on bond
coupons in recent months as it tried to win time to restructure
its debts. It warned on Thursday that it may be unable to repay
a 127 million euro loan due on Jan. 5 if it does not first reach
an agreement with lenders.
International private equity firm Blackstone Group LP
, through its credit arm GSO Capital Partners, and hedge
fund Canyon Capital LLC are among investors that have bought up
Codere debt in recent months.
The two U.S. firms gave the company extra credit lines to
tide it over and help it pay coupons.
Codere has become a prominent example of how the opaque
market for credit default swaps (CDS) can drive creditors to
influence a company's debt payment schedule rather than just
hedge their bets on its debt.
In September 2013, Codere made an intentional late coupon
payment on $300 million of its bonds that allowed it to gain
consent from its creditors, which traded on CDS, to push back
the debt maturities of a 100 million euro ($137 million) loan
By then, GSO and Canyon were investors in that loan,
snapping up the debt in the open market earlier that year. The
two debt fund managers also lent Codere 35 million euros to make
its delayed coupon payment.
Blackstone was an investor in Codere's CDS while Canyon was
not, according to a person briefed on the matter who was not
authorized to discuss the matter publicly. GSO and Canyon
declined to comment.
Sources close to Codere's debt talks have said bondholder
debts could be cut by half in a debt-for-equity swap.
Codere posted a 93 million euro loss for the first nine
months of 2013. Its core profit of 172.3 million euros, or
earnings before interest, taxes, depreciation and amortization
(EBITDA), was down nearly 27 percent from the year before.