Waterland regains JVH Gaming

Financial sponsor Waterland Private Equity Investments has snapped up the distressed senior debt backing its buyout of JVH Gaming, a Netherlands-based slot-machine operator. The move means it regains ownership of the business after seeing its original equity stake wiped out.

Waterland bought back the senior debt at a price of about 70 cents in the dollar, according to a source close to the deal, matching Axa Private Equity’s previously mooted offer. The original 2006 buyout was backed by senior and mezzanine debt, with only the mezzanine now outstanding.

The private equity owner lost control of JVH at the start of this month as profitability was halved in the wake of a new Dutch tax regime for slot-machines. Equity investors and lenders were left reeling when the Dutch government raised the effective tax rate on revenues at the business and its peers from 11% to 29%, causing the value of JVH plummet, leaving the equity under water and senior debt trading in the 40s.

The sponsor initially gained a waiver from its lender group until August 1, to allow it time to challenge the Dutch government’s decision. However, when that lapsed lenders were left holding the remaining interest in the business. JVH Gaming appointed Houlihan Lokey to advise on its negotiations with lenders. Senior creditors hired KPMG.

Benelux-based Waterland Private Equity Investments acquired the business in a 2006 buyout backed by Bank of Ireland and CIBC World Markets, which arranged and syndicated €173m of debt backing the deal. The senior debt had an A, B and C struture with a revolver of about €53m: all with standard pricing. In addition mezzanine debt totals €33m.

Last year Bank of Ireland and CIBC closed a €90m add-on to the debt, split between senior and mezzanine components. Syndication was mainly to the existing investor group and closed significantly oversubscribed, with the mezzanine piece more than three times covered – an indication both of how unexpected the tax changes were and how quickly the business was affected.

Waterland holds a substantial majority share of JVH following this week’s restructuring. The former shareholders of Flash Casinos, a company JVH acquired in 2007, and JVH’s founder also own stakes.