According to a report in today's Guardian, Gala Coral have relinquished an equity stake to lenders in moves to reduce unmanageable debt levels.
Gala Coral was formed out of a equity play in 2005 that saw the merger of Gala Group and Coral Eurobet. It operates the UK's largest bingo chain, as well as a number of other gambling operations including online casinos and bingo sites. But its low margin, high volume gambling operation has run into significant headwinds in the last few years.
Of course there is the recession, that is crippling many corporations, but also newly introduced smoking bans applying to their bingo halls and also gaming tax hikes. This year the group has had to close six of its bingo halls to cut costs and more closures are on the cards.
While yet to default on loans, the company's £2.6bn debt burden has become unmanageable and owners have struck a deal with lenders that will see £540m of that debt wiped, in return for a stake in the business.
The deal will see Gala Coral's private equity owners Candover, Cinven and Permira hand over almost half of the equity in the business to a consortium of creditors including, Intermediate Capital and Park Square. The deal will reduce debt and free up cash for working capital that management hope will get them through the current downturn.
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