Private equity firm BC Partners is about to lose control of Greek casino operator Regency Entertainment, handing over the company to lenders in a debt-for-equity swap, Reuters reported. The move comes after a breach of covenants on a 700 million euro ($998.4 million) loan. Lenders include Deutsche Bank and Park Square Capital.
(Reuters) – Private equity firm BC Partners is set to hand over troubled Greek casino operator Regency Entertainment to lenders in a debt-for-equity swap, banking sources said on Wednesday.
A co-ordinating committee of Regency lenders, which include Deutsche Bank and Park Square Capital, presented the debt restructuring plan at a meeting in London on Tuesday, the sources said.
The lenders created the plan in collaboration with Regency’s management and BC Partners after a breach of covenants on a 700 million euro ($998.4 million) loan.
The restructuring will remove the company’s 200 million euro mezzanine loans, which were raised along with 480 million euros of senior loans in 2006 to back BC Partners’ buyout of Regency, the banking sources said.
Regency’s earnings tumbled as Greek consumer spending fell amid the country’s escalating sovereign debt crisis. The gambling business has also been hit by a drop in the number of foreign tourists.
BC Partners, which recently agreed to buy Italian clothing retailer Gruppo Coin, declined to comment.
The senior loans will be converted into a single five-year loan, paying interest margins of 300 basis points (bps) over EURIBOR in cash and 100 bps as a Payment-In-Kind loan (PIK), the sources added. The loan will not have amortisation payments.
PIK loans allow companies to roll up interest payments for payment at a later date, which eases pressure on the company’s finances by reducing its cash outflow.
Lenders may also provide 35 million euros of new debt, which would be senior to the new restructuring loan.
BC Partners equity stake in Regency, which operates casinos in Mont Parnes and Thessaloniki, will be reduced to 15 percent after the restructuring.
Mezzanine lenders will swap their debt for a majority stake of 72.5 percent in return for writing down their loans and senior lenders will hold a stake of 12.5 percent in the company.
All shareholders stakes will be diluted after new management receive a 10 percent stake in the business as part of a management incentive plan.
The plan has the support of other key lenders, including debt investment funds Avenue Capital, Carlyle Group and Castle Hill. The deadline for agreeing the debt-for-equity swap is June 3, banking sources said.
(By Isabell Witt; Editing by Jane Merriman)