Gala review

Bingo, casino and online gaming company Gala Group has emerged as an IPO candidate just weeks after the ink dried on a recapitalisation that repaid half of the equity to shareholders Candover and Cinven. Deutsche Bank, Merrill Lynch and UBS have already met with the company to discuss options going forward.

A quick IPO would be good news for the sponsors, which acquired Gala in 2003 from CSFB for £1.24bn. They were each paid £140m on the back of the recap, and retain a further £140m investment in the company.

The IPO plan is opportune following the ratification of the UK Gambling Bill on April 8, which removes the rule requiring players to register 24 hours in advance of playing, and permits Gala’s casino businesses to advertise for the first time.

Debt investors reacted to the news with disappointment rather than surprise. The £1.025bn recapitalisation package saw heavy demand push a downward flex of 25bp on the B and C tranches, while second-lien pricing was cut by 50bp.

Merrill Lynch and RBS, which led the latest financing round, included IPO-related caveats in the documentation. That was perceived as a clear indication that an IPO was under consideration.

Even less impressed may be the retail investors who have been snapping up paper north of par in the secondary market. As Gala broke last week, B/C bids hit 101.25, with the second lien topping the 102 mark. Leverage is 5.1x senior net debt to Ebitda, 5.3x through the second lien and 6.1x on a total basis.