Land and Internet gambling group to be restructured

Big changes are in prospect at the UK land and online gambling group Gala Coral as longrunning ownership discussions appear to be finally reaching a conclusion. But it could be a resolution of the company's debt problems that will see private equity owners left with no involvement.

The Telegraph newspaper reports that Britain's biggest gaming operator has been at the centre of a bitter restructuring that has pitted its private equity owners, Permira, Candover and Cinven against its debt holders as junior lenders have wrestled for control.

Mezzanine lenders – led by Apollo and including Goldman Sachs, Cerberus and Park Square – have apparently now secured a deal to win full control of the company's equity. And executive chairman Neil Goulden, who had been expected to step down, has signed a binding contract to stay on and oversee an eventual listing as a public company.

At the heart of the deal is the need to cut Gala's debt burden from GBP 2.6 billion to GBP 1.85 billion. This is to be achieved by the mezzanine lenders swapping GBP 540 million of debt for a 30 percent stake and injecting GBP 200 million to take control of the remaining 70 percent. The former private equity owners will receive a 1 to 5 percent tip for consenting to the deal, and current management could end up with 10 percent depending on performance.

Goulden appeared confident that the deal was imminent, telling the Telegraph: "It is 99.9 percent certain that this deal will be agreed. Documents will be sent out tomorrow and are expected to be signed and returned by April 1," he said, adding that the only risk came from the outgoing private equity firms who are out of the money and are being pushed aside.

This possibility, too has been considered, Goulden said: "If they do not play ball, we will be forced to put the company into a pre-pack administration. Everything will still get done – but it will take longer."

Once the ownership change has been achieved, the intention of the new owners is to transfer the top company structure off-shore to Luxembourg, to protect the off-shore status of the new mezzanine investors.

Along with Goulden there will be six board positions, four taken by a representative from each of the mezzanine investors. The extra two seats have not yet been decided. "It is an incredible company that has been over-burdened by its balance sheet. We have out-traded Ladbrokes, William Hill and Rank, making GBP 335 million of profit last year. I see no reason why we will not be able to meet our timetable for going public," Goulden told the newspaper.

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