Mezzanine's lucky hand

8 December 2009 By Neil Unmack Follow @unmack1

Mezzanine debtholders are well placed to grab a slice of the UK gambling group in a looming restructuring. Senior creditors are unlikely to object. It’s a reversal of previous debt restructurings that have hurt junior debtholders, though won’t be easily repeated.

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Mezzanine lenders to Gala Coral, the UK gaming company, will meet with senior creditors this week to seek approval for a debt restructuring plan.

Under the plan, led by Intermediate Capital Group and Park Square capital, mezzanine would forfeit interest payments and restructure their debt as a new note that rolls up interest. They would also own half of the company with current shareholders, Permira, Cinven and Candover.

Private equity firm Blackstone has proposed an alternative plan, under which it injects 300 million pounds into Gala Coral to repay senior debt, according to a person with knowledge of the matter. Blackstone would take 75 percent of the company, and leave mezzanine with just 25 percent. That proposal would value the mezzanine debt at about 19 pence in the pound.

Permira is working with Blackstone, according to the Times newspaper.

Gala has 1.95 billion pounds of senior debt and 535 million pounds of mezzanine loans. The company earned 336 million pounds in the year ending September.

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