Successful Completion of Codere Corporate Restructuring
April 29, 2016
Codere was advised by Violy & Company and respective teams who completed negotiations with bondholders in a highly complex debt workout lasting 3 years, which resulted in a successful restructuring that leaves Codere poised for profitable growth.
Codere is a publicly-traded gaming company headquartered in Spain, with operations in Europe and Latin America. Prior to the company’s financial difficulties, operations generated over €300 million in EBITDA annually. The company had approximately €1 billion in publicly traded debt, denominated in EUR and USD, in addition to non-public senior and local operating company debt. The company’s financial difficulties were largely attributable to the financial crisis that developed in Argentina (Codere’s most profitable operation) beginning in 2012 after the nationalization of YPF-Repsol, and included the unusual two-year acceleration of gaming license renewals, erosion of the Argentine peso and expansion of capital controls, which resulted in large unexpected cash needs and left cash trapped in the country. The company’s financial difficulties were compounded by regulatory changes affecting the gaming industry in several countries. The rapidly developing financial uncertainty in turn endangered the renewal of the company’s senior credit facility and attracted the attention of distressed and opportunistic funds.
The restructuring effort was an unqualified success for the company and its stakeholders, with the company’s debt load reduced to a manageable level, a new cash infusion, and the founders and senior managers obtaining meaningful ownership in the company post-restructuring. Specifics included, among other features, a 50% reduction of existing publicly traded debt, €200 million in fresh capital to catch up on delayed capex, low cash interest rates on restructured debt, meaningful minority protections, balanced board in which the long term bondholders/shareholders and the minorities have active and similar representation, and perhaps most important, a strong ongoing working relationship between the founders and senior managers and the lead financial investor that came out of the restructuring as both the largest bondholder and shareholder.
Violy & Company has been advising Codere since early 2000s, and we take pride in the longevity of our client relationships. In the restructuring effort, as advisor to Codere and its founding family, Violy & Company’s responsibilities included but were not limited to: leading negotiations with the bondholders’ representatives, evaluating and formulating new proposals and/or counter proposals, developing and maintaining an operating model and restructuring model, identifying sources of efficiency both operational and financial, bridging the cultural divide between principal owners/senior management and bondholders, negotiating extensions and/or replacement of non-public senior and local debt, providing business reasoning to guide legal/documentation process, and leading negotiations of post-restructuring governance and shareholders’ agreement.
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