A profitable game

The £2.2bn loan backing gaming group Gala’s takeover of bookmaker and gaming group Coral Eurobet has closed hugely oversubscribed, through MLAs and bookrunners Lehman Brothers and RBS. The deal is in the name of the merged entity Gala Group.

The senior debt was 60% oversubscribed, the second-lien debt was four-times oversubscribed and the record £460m mezzanine tranche raised a staggering £1.2bn. Second-lien pricing was flexed down 37.5bp to 462.5bp, while mezzanine pricing was cut by 75bp to 825bp – split 4% cash and 4.25% PIK.

Pre-reverse flex the financing was split as follows: senior debt comprised a £530m seven-year term loan A at 225bp over Libor, a £710m eight-year term loan B at 250bp, a £710m nine-year term loan C at 300bp, a £200m seven-year acquisition capex facility at 225bp and a £50m seven-year revolver at 225bp.

Subordinated debt comprised a £150m second lien tranche paying 5% and a record £460m 10-year mezzanine tranche paying 4% cash and 5% PIK. That eclipses the £400m mezzanine for the AA in 2004, which was the previous European record. Both Gala and Coral Eurobet have secured large mezzanine tranches before so Gala Group should have a strong following among mezzanine investors.

A huge £425m has been carved out of the B and C tranches for institutional investors and at £850m it is one of the biggest institutional carve-outs seen in the European market. Leverage is 5.3x senior net debt to Ebitda, 5.7x through the second lien and 6.9x total.

Bank of Scotland joined as a sub-underwriting MLA ahead of launch, while ICG has taken some of the mezzanine debt on a take-and-hold basis.

Joint lead arrangers are asked to sub-underwrite £100m with a £70m hold for 100bp. On a take-and-hold basis, lead arrangers are offered £55m for 70bp, arrangers £40m for 60bp and co-arrangers £20m for 50bp.

Candover, Cinven and Permira are the sponsors and are providing £275m of new equity for the deal. Including the new Gala equity, the equity contribution is £1.5bn, or about 37.5%, underneath the mezzanine.