It has recently been reported that Gala Coral, one of the larger gaming groups, could be dismantled and sold off in its pieces to generate revenue for the business owners of this private firm. The reason for this restructuring is the need for cash in order to pay off the massive debt, which the company has accumulated over the recent years. The deadlines are approaching quickly and owners are under the gun to get cash to their creditors. It is reported that the owners, Candover, Cinven and Permira, owe an estimated £80,000,000 to an assortment of vendors due this year and another £150,000,000 due next year.
How much does Gala Coral owe in total? It is estimated that the firm owes a total of £2.7 billion. Although the Royal Bank of Scotland has very little to lose on the company they do play a crucial role since it is the agent for the majority of the firm’s main creditors. Lucky for Gala Coral, they have chosen to hire on the investment bank Lazard to take care of the formulation and execution of their restructuring which will include such ideas as debt-for-equity swaps.
According to reports, Gala Coral is not looking at selling off their assets or to break the group apart since they have £2 million on the balance sheet and have no desire to gain an equity injection. Looking out for their own interests, the Royal Bank of Scotland has sought after investors that would be looking to invest in the Gala Coral’s betting shops, casinos, Internet interests or even purchase a stake in the company as a whole. The Royal Bank simply feels that Gala Coral has to be willing to look at all options with regard to raising cash so that they can start settling the large amounts of debt they have.
Reports have been made of potential investors willing to plunk down upwards of £250 million for a non-controlling stake in the firm. This is good for not only Gala Coral but for the investors since the liability for the debt would not transfer to the investors. The Observer has also reported that as recently as the past year, £125 million was given to the firm by three different backers as a sort of rescue effort to help them refinance their operation. Since the money was given, all three investors have reported that their investments are now valued at zero. According to independent sources, the Gala Coral Company’s buyout debt is basically trading severely decreased amounts in the secondary market. This information is not lost on potential investors, but if history teaches us anything, someone will take a big chance on Gala Coral with the hopes of hitting it big with a huge payoff.
