Gala given a £125m helping hand - Friday 25th of April 2008
The private equity owners of Gala Coral, Britains largest privately-owned company, have agreed with its creditors to inject £125m into the troubled business. It is the biggest UK leverage buyout so far to suffer financial stress as a result of the current downturn.
Gala, which operates 1,566 Coral betting shops, 165 bingo halls and 31 casinos, has seen its business decline following the introduction of the smoking ban. The downturn in the bingo business, which has also hit a number of other smaller bingo club operators, has forced Cinven, Permira and Candover, the private equity funds that own it, to restructure the businesss debt.
Comment: The balls have fallen unkindly for Gala
As trading has deteriorated, the company has realised it may be in danger of breaching certain banking covenants this year.
Gala Coral has seen its business decline following the introduction of the smoking ban
Yesterday, Galas management held a secret meeting with the syndicate of banks that controls its debt to discuss amending the companys covenants, according to sources familiar with the matter. Investment bank Lazard is thought to be advising the company on the debt restructuring.
Sources said the management had suggested that £125m of new equity should be injected into the business so that about £83m of senior debt can be paid off.
It is understood that the remaining £42m will be placed on Galas balance sheet. In return for the equity injection, lenders have been asked to agree a change to the interest covenants. This is designed to provide what was described yesterday by one observer as greater "headroom" for the company going forward.
It is understood the banking syndicate have informally agreed to the deal.
However, debt holders still have to go through a legal process whereby they have to formally accept the offer, which could complete in a couple of weeks.
advertisementThe three private equity funds will split equally among themselves the £125m cash injection which they have offered to put into the company, said sources.
Gala is often cited as the darling of British private equity, having been one of the most successful leveraged buyouts of the 1990s. The group has passed through numerous private equity hands in a series of increasingly ambitious refinancing deals.
The companys growth was spearheaded by John Kelly, now chairman, who spotted the opportunity of building a large scale business out of a small ticket, high volume operation such as bingo. In 2005 Gala bought Coral Eurobet for about £2.2bn in what was one of the largest private equity backed deals of that year.
As well as the smoking ban, the companys performance has also suffered from higher tax rates, the closing of a lucrative loophole in slot machine regulation and declining consumer confidence.
Results for the year to September 2007 showed the company posted an annual pre-tax loss of £128m, 11pc higher than the previous year.
Other news from around the same time
Genting to take over UK’s Rank? - Friday 25th of April 2008
Speculation that Genting Bhd is looking to take over Rank Group Plc remains rife as the UK’s secon....
New offshore casino for Goa, billed as India’s largest - Friday 25th of April 2008
Goa’s Mandovi river is soon to be home to what is possibly the largest floating casino in India, w....
Dutch parliament votes against online gambling bill - Friday 25th of April 2008
The upper house of the Dutch parliament defeated a bill that would have allowed monopoly casino oper....
Reply to calls to relax slot machine law delayed - Friday 25th of April 2008
The government will wait until after parliaments spring break to respond to calls from bingo and amu....
Poker bill could mean longer gaming hours - Friday 25th of April 2008
Poker rooms could stay open later and dormant jai-alai frontons could become greyhound racetracks un....
Congress Encouraged to Take Action on Internet Gaming Regulation - Friday 25th of April 2008
Prime Table Games, a Las Vegasbased casino game development company, today ran a full-page statement....
Las Vegas wild card trashes Atlantic City - Friday 25th of April 2008
Sheldon Adelson, the richest man in Las Vegas, at a benefit for John McCain at the Venetian last wee....
Visitor arrivals jumped to 27 million last year - Friday 25th of April 2008
The number of visitor arrivals last year jumped to just under 27 million last year, up by 23 percent....
Gala puts block on Rank’s G spot - Friday 25th of April 2008
RIVAL gaming groups Gala and Rank are at loggerheads in a row over trademarks. Rank is thought to be....
Vladivostok is Likely to Lose Gambling Area - Wednesday 26th of March 2008
Vladivostok is likely to lose gambling areas in Russkiy Island. The Head of Russian Union of Manufac....