March 12, 2010 / 5:48 PM / 9 years ago

RLPC-Gala's junior lenders poised to take control -investors

LONDON, March 12 (Reuters) - UK gaming group Gala Coral moved closer to agreeing a debt restructuring on Friday that will see junior lenders inject 200 million pounds ($303 million) of fresh capital and take control of the company, investors said.

Lenders met on Friday to discuss a restructuring proposal that could see mezzanine lenders including Apollo [APOLO.UL], Park Square, Cerberus and Goldman Sachs becoming Gala Coral’s new owners, two investors said.

Mezzanine lenders asked senior lenders to agree to their proposals to inject 200 million pounds and take control of Gala by turning existing mezzanine loans into equity, the sources added.

Gala Coral was not immediately available for comment.

Private equity firm Permira [PERM.UL] stands to take the biggest hit from the loss of control as Gala’s other two owners - Candover CDI.L and Cinven [CINV.UL] - had already taken their equity contributions out, the two investors said.

“Candover and Cinven cashed out and Permira will get nothing from what it put in,” one of the investors said.

Permira declined to comment.

The mezzanine lenders have already reached an agreement with the steering committee which holds 22 percent of the senior debt and need another 45 percent to agree to gain a two-thirds majority.


Senior lenders are expected to agree to the proposals which improve their position by solving Gala’s liquidity problem and cutting its debt.

Lenders rejected an earlier proposal that would have seen 175 million pounds put into the business in February. [ID:nLDE61F004]

Senior lenders are being offered an interest margin increase of 125 bps along with a fee of 100 bps and will also be repaid by 200 million pounds of debt.

“This is what the seniors have been waiting for, its not a just a sticking plaster, a second fund investor said.

Negotiations are expected to continue as some funds are not happy that the 200 million pounds repayment has been earmarked to repay Gala’s term loan A and capital expenditure facility and not the company’s B and C term loans.

This would mean that some investors would not get any repayment from the equity injection, however the issue is expected to be resolved in negotiations, the sources said.

News of the proposals pushed the value of Gala’s loans higher in the secondary loan trading market. The company’s term loan A rose to 94.75 percent of face value on Friday, according to Thomson Reuters LPC data.

“The reaction from the market is good, the second investor said. ($1=.6592 pounds) (Editing by Greg Mahlich)

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