Well, just last week we said that Gala bingo looked set to finally place their bingo troubles behind them, it and it seems like the refinancing deal has finally been hit – giving one of the UK’s biggest bingo operators a much needed lifeline after a 2009 that was punctuated by crippling debt and club closures.
The online bingo operator has been saved from potential collapse with a refinancing deal which involves swapping some of it’s debt for equity – and will cut the debt of the Gala Coral group from an eye watering £2.6 billion to £1.85 billion.
A report in the times broke the news that deal had been given the go ahead, will mean Gala Coral will now be owned by its mezzanine finance providers, which are led by Apollo Management, Cerberus Capital Management, Goldman Sachs and Park Square Capital. Apollo will become the biggest shareholder, with an estimated share of around 25 per cent of the company.
However, the deal is business, and in business there are always losers. Specifically, it seems Gala Coral’s private investors will be coming off worse for wear because of the deal, with Candover, Cinven and Permira being given a payoff that is equivalent to about 1 per cent of the total refinancing in return for their consent to the deal. Although the companies could refuse, this would lead to a restructuring being forced through, with the company being forced into administration. With such an unattractive prospect for everyone – including online bingo fans – it seems likely all will go ahead as planned.
But it is rumoured by insiders that Permira would have lost around £500 million as a result, a big gamble that clearly hasn’t paid off for them. As one of the final groups to takeover parts of Gala Coral in 2005, the firm has only managed to see the worst parts of the group, with Gala having a well documented plunge in profits due to decreasing players at their land based clubs and an ever growing mountain of debt payments.
The fortunes of the Gala Coral group look set to take a turn for the better now, with part of the deal including a £200 million cash injection into the beleaguered bingo giant to help it continue getting back on it’s feet. And considering the tightening of the Gala Coral group’s operational outfit over the last few years, many are hoping it will come back leaner and meaner as a result.
The current Gala Coral management team, which is led by Neil Goulden, the chairman, and Dominic Harrison, chief executive, is thought to be still in control following the deal. Senior management have won plaudits for maintaining the group’s operational performance at industry-leading levels, despite the doubts over its future and the tough trading backdrop.
Mr Goulden, a key figure in the talks, refused to comment on the details of the refinancing last night, but confirmed that a deal had been struck. He said: “We’re delighted agreement has been reached on the refinancing, which significantly reduces the debt level. Gala Coral was a great company with a weak balance sheet. It is now a great company with a strong balance sheet.”
The deal has been recommended by Gala Bingo’s lenders, which include RBS. If completed as intended, the deal will be done and dusted by May time, giving us all a summer of Gala Bingo fun to look forward to!
Let’s hope things are finally looking up for one of the biggest names in online – and offline - bingo!
