Gala Coral ownership talks follow debt sale

GALA CORAL MIGHT be bought by a new private equity consortium following the sale of part of its debt this week, according to reports in the financial press today.

Investors including US private equity groups Apollo Management, Cerberus and Goldman Sachs have emerged as potential contenders to take control of the operator, which owns one of Britain’s biggest bingo sites, GalaBingo.co.uk, a string of bingo halls and casinos and the bookie chain Coral, but fell to 36^th place in the 2009 Power 50, from 11^th place the year before, due in part to its restrictively high debt of £540m.

The operator is currently owned by private equity houses Candover, Cinven and Permira. However talks of new ownership follow one of the company’s biggest holders of mezzanine debt along with its co-investors, ICG Capital, having sold its debt claims against the company yesterday.

Around 25% of Gala’s £540m of mezzanine debts was sold in a trade facilitated by Goldman Sachs at just below 70% of face value, according to unnamed sources cited in The Financial Times, who are reported to have said that further trades from other holders were also expected.

Apollo, which already held 15 % of the mezzanine debt, Cerberus and Goldman Sachs were among those that bought the debt, the newspaper said.

A new committee of creditors representing the mezzanine lenders is expected to form later this month once the trades have cleared to meet with the company and its banks to agree a debt restructuring.

ICG and Park Square Capital, which together owned 45% of the mezzanine debt, had been involved talks on a potential restructuring plan for Gala’s £2.5bn debts. Park Square, which owned with co-investors around £70m of the mezzanine debt, is expected to retain its position.

ICG and Park Square last year tabled a proposal to share control of the company with existing shareholders in exchange for restructuring their debts. This had the support of a majority of both the mezzanine lenders and the shareholders.

However, ICG’s latest move comes after senior ranking lenders earlier this month demanded a restructuring involving an injection of £150m of new funds, which would be used to invest in the business and reduce leverage.

For more on private equity investment in egaming, see this month’s Private equity – why so shy? feature.