Gateway Casinos Announce Plans for Major Debt Restructuring
The Canadian casino operator Gateway Casinos & Entertainment is set to secure CAD 1.8 billion in private debt in order to streamline its debt structure and deliver dividends to shareholders.
Gateway Casino hopes to raise $1.3 billion in private debt.
LISTEN TO THIS ARTICLE:It has been reported that Morgan Stanley is overseeing the deal, which could become one of Canada’s largest private debt transactions this year.
Various Loan Structures Under Consideration
Morgan Stanley is exploring various loan structures to help Gateway Casinos obtain favorable financing terms. The company, primarily owned by Catalyst Capital Group since 2009, may adjust its borrowing targets based on lender feedback. Catalyst had previously considered options for its investment in Gateway, including a potential sale, although those plans didn’t materialize.
Due to Gateway’s credit rating challenges, the company is opting for private financing. Last November, Moody's elevated Gateway Casinos’ credit rating to “B3”, which remains in the high-risk category. Companies with similar credit scores often turn to private markets where they can access funds that may not be available through public markets.
Private credit markets, which are primarily backed by non-bank entities such as private equity firms and hedge funds, cater to companies that may struggle to secure traditional bank loans due to credit constraints. This market, valued at approximately $1.7 trillion in the United States, has seen increased competition as private lenders make deals outside of conventional syndicated markets. This is aided by a willingness to take on riskier investments, illustrated by Pure Fishing’s recent $750 million loan.
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Gateway’s Actions in Keeping with Industry Trends
Gateway Casinos’ debt restructuring mirrors similar actions taken by other Canadian online casinos. A few days ago, Great Canadian Gaming Corporation, owned by Apollo Global Management, launched a $665 million term loan in the U.S. leveraged loan market. Great Canadian’s objective is to reduce its debt interest, a goal Gateway might also pursue through private debt markets.
Catalyst Capital has previously sought to capitalize on its Gateway investment. In 2019, Catalyst and the special-purpose acquisition company Leisure Acquisition tried to bring Gateway Casinos public, valuing the company around $1.15 billion, but it was ultimately unsuccessful. If the new financing proposal goes ahead, it would be the latest move by Gateway to extract value from its 31 casino properties across Ontario, Alberta, and British Columbia.
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