Codere strikes deal to avoid insolvency

Codere strikes deal to avoid insolvency

Wednesday, September 24, 2014

Spanish gaming company Codere has reached a deal with its creditors to restructure €1.1bn ($1.4bn) of debt and stave off the threat of insolvency and near-certain liquidation.

Under the complex plan, which is expected to take between nine and 11 months to implement, Codere’s founding Martinez Sampedro family will give bondholders a controlling stake in the company, which will eventually be delisted from the Spanish stock exchange following the restructure.

Current bondholders will be granted 98% of Codere’s capital before selling back as much as 19.58% to the founding family. The deal will also include issuing €675m of new bonds and €253m of new loans.

Codere, which has operations in Spain and Latin America, has been in talks with creditors for months after failing to meet interest payments. Beginning insolvency proceedings would have been a major setback, with about 19 of every 20 companies in Spain liquidated after such a development.

However, the new deal is backed by more than 80% of the company’s euro-denominated bondholders and nearly 90% of its dollar-denominated bondholders and the family.

Chairman and chief executive Jose Antonio Martinez Sampedro will remain in his role, Codere added in a statement.

Codere, which employs nearly 18,000 people, filed for preliminary creditor protection in January. The company had until yesterday (Tuesday) to reach an agreement with creditors or begin insolvency proceedings.

Bondholders including Silver Point Capital and M&G Investment Management were advised by Houlihan Lokey in the negotiations. Canyon Capital Partners is among the holders of Codere’s €127.1m loan, while Blackstone Group’s GSO Capital Partners reduced its holding to about 20% in January.

Martinez Sampedro and his siblings, Luis Javier Martinez Sampedro and Encarnacion Martinez Sampedro, held 68.5% of Codere before the new announcement of the new deal.

Codere has been hit by recessions, higher taxes and stricter gambling regulations in a number of key markets in recent years.

Earlier this month, Codere cited challenging markets in Argentina and Mexico for a 15.2% year-on-year drop in revenue to €656.6m in the first six months of 2014.

Codere’s financial challenges have not prevented the company from seeking to expand its business in certain areas though. In July, Codere’s Mexican entity struck an agreement with gaming software provider Las Vegas From Home.com Entertainment and the Salinas TV Azteca Group to launch an online gaming venture in Mexico.

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