Gala Coral owners face debt-for-equity swap

The bingo and bookmaking group owned by UK-based private equity firms Candover, Cinven and Permira is in talks to reduce its £2.6bn debt burden.

Gala Coral, the bingo and gambling group owned by Permira, Candover and Cinven, is currently in negotiations with lenders to reduce its £2.6 billion (€2.8 billion; $4.1 billion) debt burden, sources close to the process have confirmed.

The business has faced a taxing mix of conditions over the last two years. Aside from the widespread effect of the economic downturn on consumer spending, the group’s bingo halls suffered in 2007 from the UK’s smoking ban and increased taxes. Earlier this year the group said it would eliminate up to 300 jobs.

Candover Investments and SVG Capital – two publicly listed vehicles with significant exposure to Candover- and Permira-managed funds respectively – both wrote down the value of their underlying holdings in Gala Coral to zero last year.

Gala Coral is the product of a merger between gaming group Gala Bingo – owned by its three current financial sponsors – and bookmaking business Coral Eurobet – owned by Charthouse Development Capital. Gala bought the bookmaker in 2005 for £2.2 billion.

The current negotiations are likely to result in the mezzanine lenders to the business – led by Intermediate


Capital Group and Park Square – assuming control of up to half of the buyout houses’ equity stakes in the business, according to a report in UK newspaper The Sunday Times. One source with knowledge of the situation said that the mezzanine lenders would be likely to take a “haircut” on their loans of around £540 million.

Increasing numbers of portfolio companies have undergone restructuring operations similar to the one currently being negotiated at Gala Coral. German yacht maker Bavaria Yachtbau, which was until recently owned by Bain Capital, last week moved into the control of two of its lenders – two specialist debt investors Oaktree Capital Management and Anchorage Capital.