Gala Coral in refinancing talks
Bookmaking and bingo group Gala Coral has today announced an agreement with the company's bankers which will see £540 million wiped off the company's debts in exchange for a 50% share of the business. In what was to all intents and purposes a no-brainer, due to the fact that the business was drowning under a sea of debt, private equity firms Candover, Cinven and Permira were effectively forced to agree to the refinancing arrangement.
This particular announcement will surprise many people who had believed that bookmaking and bingo were very popular in the UK and indeed very profitable. While this may actually still be the case, it is worth remembering that the takeover of the business was originally financed by a significant amount of debt, with the cost of financing this debt having increased dramatically over the last two years.
The announcement will bring the company's debt down to more manageable levels and should be more than enough to see the business through these most difficult of times. However, Gala Coral will not be the last large UK corporate to agree to a debt for equity swap as companies now look towards the future and securing their balance sheets in the short to medium term.
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