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Gala restructures capital to give money back to sponsors

Private equity houses Candover and Cinven have taken advantage of a favourable market to extract £1.025 billion ($1.915 billion) from UK gaming company Gala. The lending facilities with Merrill Lynch, Royal Bank of Scotland and Intermediate Capital have achieved cheaper funding than the original facilities, arranged as part of an LBO in February 2003.

They have also been reorganised to insert a second lien facility between the senior term loans and the mezzanine facility, a growing trend in recapitalisations that enables the sponsors to increase leverage in an attractive market without breaking any negative pledge clauses with existing lenders.

As a result, not only have Candover and Cinven achieved cheaper funding, they have managed to pay themselves a large dividend with the proceeds. As with many financing structures, it is a valuable example for CFOs set by private equity sponsors.

International law firm Linklaters advised the banks on the deal. Partner Gideon Moore, who led the deal, said: “Like the recapitalisation of Bertelsmann Springer, a second lien facility has been inserted between the senior and mezzanine facilities and reflects a growing trend in the sponsor-backed leveraged finance market.”

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