Blackstone bids to take control of Gala Coral

Private equity giant Blackstone is gambling on an audacious eleventh hour intervention in the massive £2.5b debt restructuring at beleaguered bookmaker-to-bingo group Gala Coral.  

Blackstone has been allowed to conduct due diligence at the company, which at its height employed 19,000 people and had been given the moniker of Britain's biggest private business, valued at £5b.

A deal with the American buy-out house could see Blackstone make a £250m to £300m cash injection into the business for a majority stake.  

It would enable the senior lenders, who are owed £2b, to keep their debt intact and offer the mezzanine debt holders – who are on the verge of launching their own deal for control of the group – a minority equity stake going forward.

Blackstone's involvement would usurp an agreement between Gala's current private equity owners – Cinven, Permira and Candover – and its junior lenders designed to keep the company's bingo and gaming divisions together. It was agreed in principle just weeks ago.

Under the terms of the three-year turnaround plan with mezzanine lenders Park Square and Intermediate Capital, Gala Coral would not need to make disposals. Instead, the two mezzanine lenders proposed to swap £540m of debt into half the company's equity. They would also take half the seats on Gala Coral's board.

More than 75 percent of mezzanine lenders have agreed to this structure and final documents are being prepared for an imminent launch. Only two-thirds of senior lenders need to vote in favor.

In Gala's presentation to those lenders, Neil Goulden, chairman, put forward a three-year business plan.

The company, which operates almost 2,000 licensed betting offices, 148 bingo clubs and 27 casinos, said that in 2009 earnings before interest, tax, depreciation and amortization (ebitda) had fallen 7 percent to £340m.

(Source: Telegraph)

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