Private equity firm BC Partners' troubled Greek casino operator Regency Entertainment has asked lenders to agree a debt-for-equity swap after breaching covenants on its 700 million euro loan, banking sources said on Wednesday.
The company presented the debt restructuring plan to lenders at a meeting in London on Tuesday, the sources said. The plan was created by co-ordinating lenders including Deutsche Bank and Park Square Capital.
The restructuring will remove the company's 200 million euro mezzanine loans, which were raised along with 480 million euros of senior loans in 2006 to back BC Partners' buyout of Regency, the banking sources said.
Regency's earnings tumbled as Greek consumer spending fell amid the country's escalating sovereign debt crisis. The gambling business has also been hit by a drop in the number of foreign tourists.
BC Partners, which recently agreed to buy Italian clothing retailer Gruppo Coin, declined to comment.
The senior loans will be converted into a single five-year loan, paying interest margins of 300 basis points (bps) over EURIBOR in cash and 100 bps as a Payment-In-Kind loan (PIK), the sources added.
PIK loans allow companies to roll up interest payments for payment at a later date, which eases pressure on the company's finances by reducing its cash outflow.
Lenders may also provide 35 million euros of new debt, which would be senior to the new restructuring loan.
BC Partners equity stake in Regency, which operates casinos in Mont Parnes and Thessaloniki, will be reduced to 15 percent after the restructuring.
Mezzanine lenders will swap their debt for a majority stake of 72.5 percent in return for writing down their loans and senior lenders will hold a stake of 12.5 percent in the company.
All shareholders stakes will be diluted after new management receive a 10 percent stake in the business as part of a management incentive plan.
The plan has the support of other key lenders, including debt investment funds Avenue Capital, Carlyle Group and Castle Hill. The deadline for agreeing the debt-for-equity swap is June 3, banking sources said.
REUTERS
