LONDON (Reuters) – Hedge funds have bought a strategic stake in troubled UK gaming group Gala Coral’s junior debt which will give them a place at the table in the company’s long-running restructuring, banking sources said on Friday.
Apollo Management [APOLO.UL], Cerberus Capital Management [CBS.UL] and Goldman Sachs bought a stake of around 130 million pounds at a discount of around 69 percent of face value, several sources said.
Other investors also took advantage of the rise in the mezzanine loan’s secondary price to 59 percent of face value last Friday, according to Thomson Reuters data, to sell their stakes. Mizuho also sold a chunk of 25 million pounds, one banker said. Gala declined to comment.
Other hedge funds, including York Capital Management, SVP and Varde also bought the paper, two other sources said, in a move which gives them more rights in the restructuring.
“This move threatens the current shareholders. You wouldn’t be spending that kind of money without getting something out of it,” an investor said.
The debt was sold by investors that were either unwilling or unable to contribute new money after senior lenders asked for a 150 million pounds injection in late 2009.
“Some people can’t or don’t want to provide new money and took advantage of the run-up in the price to sell,” another investor said.
Mezzanine debt specialist Intermediate Capital Group (ICP.L) and debt investor Park Square Capital put a stake of 189 million pounds up for sale earlier this week.
Intermediate Capital Group and Park Square’s co-investors sold their stake of around 130 million pounds, as well as other investors including Mizuho, two sources said.
Park Square LLP decided to hold on to its stake as a principal investor, several sources said.
The investors that sold at 69 percent of face value may not have realised a significant loss as mezzanine debt accrues, the first investor said.
ICG declined to comment. (Reporting by Tessa Walsh and Zaida Espana; Editing by Greg Mahlich)Get your FREE trial or subscribe now to Buyouts to find new deal opportunities, super-charge your fundraising efforts and track top managers.