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Gateway Casinos & Entertainment Limited Completes Refinancing of Corporate Debt in USD $1.25 Billion Transaction

·5-min read

Transaction includes refinancing of entire Capital Structure and repayment of CAD $200 Million of outstanding LEEFF loan facility

BURNABY, British Columbia, October 25, 2021--(BUSINESS WIRE)--Gateway Casinos & Entertainment Limited ("Gateway" or "the Company") today announced that it has closed a US$1.25 billion Senior Secured Term Loan B issuance to refinance its capital structure and fund cash to the balance sheet. Funds managed by affiliates of Fortress Investment Group LLC ("Fortress") were lead investors in the transaction.

Gabriel de Alba, Executive Chairman of Gateway, said, "We are very pleased to have completed this significant refinancing with Fortress as the lead investor. As Gateway re-opened its operations in the third quarter, the company’s focus on operational discipline, including a more streamlined cost structure, and our focus on our guest experience, has led to performance that has exceeded our expectations. The company’s ability to move so quickly after such severe restrictions is testament to our leadership team and employees, and our focus on preserving as much liquidity as possible throughout the pandemic, including through the assistance of the Canadian government’s LEEFF program. We are grateful for the ongoing support of all our stakeholders and regulatory partners and proud to have now strengthened our capital position which will support our future growth initiatives, including online gaming opportunities."

Tony Santo, Gateway's Chief Executive Officer, said, "Gateway is a unique gaming and entertainment company that since reopening in British Columbia and Ontario following an extended period of closure due to the COVID pandemic, has generated higher property level operating margins and adjusted EBITDA than expected. We appreciate the support of our new lenders as the refinancing of our entire capital structure, and the repayment of the full amount that was outstanding on our LEEFF loan facility, has positioned the company with the financial flexibility to continue delivering excellent customer experiences in gaming, food and beverage and entertainment at our properties, restarting our development projects and driving performance that can continue to support further deleveraging of our capital structure."

"Gateway has done an exceptional job in navigating and emerging from a historically challenging period," said Fortress Managing Partner Josh Pack. "We are thrilled to provide Gateway with a capital solution that will position the company for profitable growth and success in the years ahead."

Transaction Details:

The Senior Secured Term Loan B carries both USD (US$1,073,150,000) & CAD (C$218,640,000) denominated term loan tranches, which mature 6 years from the closing date, providing Gateway with significant maturity runway and additional liquidity to fund its operations.

Pricing of the USD denominated term loan is tied to the secured overnight funding rate ("SOFR") plus a credit spread adjustment ("CSA") of 10 basis points for the one-month rate and 15 bps for the three-month rate, marking it as one of the first institutional term loans to be issued using SOFR pricing starting at the closing date. The USD denominated term loan carries a coupon of SOFR+CSA+800 bps, while the CAD denominated term loan carries a coupon of CDOR+800 bps. Both term loans carry 0.75% floors, 1.00% amortization per annum, and were issued at 98.00 OID. During the initial 18 months post-closing, Gateway maintains the option to PIK up to 300 bps of the term loans’ coupons, subject to a 150 bps premium.

The term loans provide Gateway the flexibility to voluntarily prepay at 103%, 102%, and 101% of principal amount in the first three years post-closing, respectively, and include a special optional redemption right at 101% of Par for up to US$400MM using proceeds from a qualified equity issuance or in connection with a merger or sale.

Net proceeds from the transaction were used to refinance all of Gateway’s existing corporate debt at both Gateway Casinos & Entertainment Limited and GTWY Holdings Limited, including the Large Employer Emergency Financing Facility loan agreed to in September 2020, simplifying the Company’s capital structure.

In connection with this refinancing transaction, Gateway received a meaningful corporate credit rating upgrade at Moody’s to Caa1 (Positive Outlook).

Morgan Stanley Senior Funding, Inc. served as Sole Lead Bookrunner. Fortress Credit Corp. and Morgan Stanley Senior Funding, Inc. served as Joint Lead Arrangers.

About Gateway Casinos & Entertainment Limited

Gateway Casinos & Entertainment Limited ("Gateway") is one of the largest and most diversified gaming and entertainment companies in Canada with 26 gaming properties in British Columbia and Ontario and two additional properties in Edmonton, Alberta. As at March 16, 2020, immediately prior to the implementation of COVID-19 restrictions, our operations comprised of 26 gaming properties in British Columbia and Ontario, with 12,971 slot machines, 365 table games (inclusive of 41 poker tables), 902 bingo seats and 79 food and beverage ("F&B") outlets. As at July 14, 2021, we had approximately 6,500 employees in British Columbia and Ontario. A multi-pronged growth strategy has seen Gateway diversify and expand its product offering, including developing proprietary casino and restaurant brands, dramatically improving the gaming customer experience while attracting new customers. Some of Gateway's proprietary brands include Match Eatery & Public House, Atlas Steak + Fish and the new Halley’s Club. In 2017, Gateway celebrated 25 years in the business of gaming and entertainment in Canada. Additional information is available at www.gatewaycasinos.com.

About Fortress

Founded in 1998, Fortress manages $53.9 billion of assets under management as of June 30, 2021, on behalf of approximately 1,800 institutional clients and private investors worldwide across a range of credit and real estate, private equity and permanent capital investment strategies.

About The Catalyst Capital Group

The Catalyst Capital Group Inc., a private equity investment firm with more than $6 billion in assets under management founded in 2002, is a leader in operationally focused turnaround investing. The firm's mandate is to manufacture risk adjusted returns, in keeping with its philosophy of "we buy what we can build." Catalyst's Guiding Principles of investment excellence through operational involvement, superior analytics, attention to detail, intellectual curiosity, team and reputation are key to the firm's success. The Catalyst team collectively possesses more than 110 years of extensive experience in restructuring, credit markets and merchant and investment banking in Canada, the United States, Latin America and Europe.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211025005287/en/

Contacts

Gateway Casinos & Entertainment:

Investor Relations:
JCIR
Richard Land, +1 212.835.8500
land@jcir.com

Media:
Gateway Casinos & Entertainment
Tanya Gabara, +1 604.296.5052
tgabara@gatewaycasinos.com

Catalyst Capital Group:
Gagnier Communications
Dan Gagnier, +1 646.569.5897
dg@gagnierfc.com

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