Codere issues new notes and restructures debt
Before the COVID-19 pandemic, it seemed that Spanish casino and gaming operator Codere was going through a great time. However, despite its efforts to grow its global presence, signs of financial distress began to appear that could not be ignored. The global pandemic that we are experiencing aggravated the situation and the company began to work with its creditors to find an equitable solution. However, the long-term impact of the struggles and debt restructuring does not appear to be enough, as Moody's Investor Services has now become less optimistic about the future of Codere.
Earlier this month, the company signed an agreement with creditors and is now in liquidation. The assets of the company are being transferred and the shareholders will try to find a solution to the company with $ 271.5 million in cash. Certain debt maturity payments due this year will be delayed until 2023 and then again until 2026. Codere will also issue $ 120.6 million in new senior bonds, before the end of May in two tranches, the first for $ 36.19 million and the other for balance.
Once the restructuring is completed, Codere's creditors will control 95% of the company's capital and the company's shareholders will control 5%. When the restructuring was announced last week, Codere explained that with the implementation of this restructuring that is expected to conclude at the beginning of the fourth quarter of the year, they hope to ensure the future of the company, thanks to the trust of its bondholders, to its management team and in most of the ten thousand employees that make up the organization.
A difficult situation for Codere
In 2019 Codere reported profits of $ 1.26 billion, but during the first three quarters of last year it reported corporate losses of $ 289.5 million. Covid-19 restrictions have disrupted Codere's business operations, significantly damaging profitability and cash flow generation, leading to an inevitable liquidity crisis.
In January, it announced that it was issuing new bonds in an effort to right the ship, but it was also going to pay a very high interest rate, highlighting the precarious situation the company is in. Refinancing risk will remain high, intermittent lockdowns and social distancing measures will continue to pressure recovery, as will point-of-sale closures, trends that may continue until the majority of the population is vaccinated.
Moody's Investor Services has downgraded the company's senior bond ratings and offerings as it predicts the company will have no more cash by the end of this month. While it is recognized that the new cash injections will aid the restructuring, there is very little prospect of a recovery of principal or interest. Codere continues its negotiations with the bondholders to reach an agreement on a sustainable capital structure.
Market opportunities
The sports betting industry in Latin America is expected to expand outpacing the stagnation rates of European markets. Codere is well positioned to grow in the region due to its recently launched online and established offline platforms. Regulation continues to evolve in Latin America, leaning toward optimal tax settings for industry, particularly after larger post-pandemic budget deficits that require additional funding globally.
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