UPDATE: Gala Coral Seeking Consent To Issue High Yield Bonds

5th Jul 2010 15:33

(Adds details, background) By Ainsley Thomson Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. betting and gaming group Gala Coral--which two weeks ago slashed its debt by GBP700 million to GBP1.9 billion as it completed a debt restructuring--has asked its lenders for permission to issue up to GBP600 million of subordinated, high yield bonds, people familiar with the matter said Monday. The bond will be used to repay existing senior debt at face value, the people said. Gala Coral executive chairman Neil Goulden told Dow Jones Newswires that the company believed a high yield bond would be in the best interests of shareholders and senior lenders, but it would only be issued if the market conditions were right. The European high yield bond market has experienced a volatile six months. After a bumper start to the year, the market all but froze in May and the first half of June due to risk aversion sparked by the sovereign debt crisis. However, in the past fortnight issuance has resumed, leading market participants to predict that the opening-and-closing pattern of issuance will last for the remainder of 2010. Before Gala Coral can issue any bond, its lenders must consent to changes to documentation to allow the deal to proceed. The lenders are being offered a 20 basis point consent fee, which equates to a total cost to Gala Coral of around GBP3 million, sources said. The offer expires on July 21. The consent will remain valid for nine months, allowing Gala Coral to issue bonds at any time until April 2011. The company's initial issue must be at least GBP300 million in size, with a maximine size of GBP600 million. Any new bond will be subordinated to Gala Coral's existing senior debt. Goldman Sachs is acting for Gala Coral to obtain the consent, while the Royal Bank of Scotland Group is agent on the process. Last month, Gala Coral completed a 12-month long debt restructuring that saw its mezzanine lenders take control of the company after converting GBP558 million of debt into equity. The mezzanine lenders, who also injected GBP200 million of cash into the company, are led by Apollo Management LP, Cerberus Capital Management LP and Park Square Capital, and York Capital management. Gala Coral's former private equity owners Cinven Group Ltd., Candover Investment PLC (CDI.LN) and Permira exited the company following the restructuring, splitting a GBP10 million pay-off among them. Cinven and Candover bought Gala for GBP1.9 billion in 2003, and in 2005 Permira became a third and equal owner. The three injected GBP124 million of capital into the company in 2008 to avoid breaching banking covenants. By Ainsley Thomson, Dow Jones Newswires; 44 20 7842 9318; [email protected] (END) Dow Jones Newswires July 05, 2010 10:33 ET (14:33 GMT)