Published on: October 25, 2024, 05:43h.
Last updated on: October 25, 2024, 05:43h.
Canada’s Gateway Casinos is reportedly considering issuing $1.8 billion in private credit to reduce existing debts and pay dividends to its owners.
Bloomberg reported the news earlier today, citing anonymous sources familiar with the situation. The casino operator is said to be collaborating with Morgan Stanley to approach potential lenders for the financing. If approved, this would be one of the largest transactions in Canada’s private debt markets this year. The company may be seeking private debt due to its low credit ratings.
“In the private credit market, investors provide loans to businesses and individuals who may struggle to get credit from banks or public markets,” as defined by Investopedia.
Gateway’s credit rating was last upgraded by Moody’s Investors Service in November 2022, moving from “Caa1” to “B3.” The “B3” grade is six notches below investment grade at Moody’s.
Gateway Casinos Previous Sale Consideration
Reports of Gateway Casinos potentially entering private debt markets emerged a year after discussions about a possible sale of the company, which did not materialize.
Catalyst Capital Group, a private equity firm with over $6 billion in assets under management, acquired control of the gaming company in 2009. Gateway operates 31 casinos in Alberta, British Columbia, and Ontario. Last year, Gateway was rumored to be looking for a $2 billion sale, slightly more than the $1.8 billion it could raise through a bond sale.
If reports are accurate about the gaming operator seeking cash in private markets, it would be Catalyst’s latest effort to monetize its stake in the Canadian casino giant. In December 2019, hedge fund HG Vora, Catalyst Capital, and Leisure Acquisition Corp. attempted to take Gateway public at a $1.15 billion valuation, but the deal fell through in June 2020.
Capital Raises by Gateway Competitors
Recently, Great Canadian Entertainment, a major competitor of Gateway, launched a $665 million term loan in the US to pay off debts with higher interest rates. Great Canadian is owned by Apollo Global Management (NYSE: APO).
Regarding Apollo, the private equity firm’s actions demonstrate that companies like them pay dividends to themselves from casino holdings. Earlier this year, Apollo sought approval from Nevada regulators for a $550 million dividend from the Venetian on the Las Vegas Strip.
It remains uncertain if Canadian regulators will approve Catalyst’s plan to pay itself a dividend through the issuance of Gateway debt. The key distinction from the Apollo/Venetian dividend was that the latter was funded by cash flow.