Codere Sees Shares Drop By 12% After Liquidation Deal With Creditors

Codere, a Spanish online sports betting and casino operator, has seen its stock drop 13 percent to €1.08 after reaching an agreement with its creditors to put the company into liquidation.

As a result of the liquidation, Codere assets will be transferred to a new organisational structure in order to ensure the company’s variability, which will be backed up by a €225 million cash infusion from its shareholders.

Creditors of the company have already agreed to capitalise more than €350 million in debt, which corresponds to senior guaranteed bonds that have already been issued.

Restructuring terms

As part of the restructuring terms, creditors decided in January to enable the Bolsa Madrid gambling company to defer its debt maturity payments from 2021 to 2023.

These maturities will be extended for another three years under the terms of the new deal, moving in full to September 2026 and November 2027.

“This represents a significant reduction in current levels of debt, with a liability in the operating group that would be around 700 million euros, equivalent to about three times the EBITDA expected after the pandemic has been overcome, a level of debt considered sustainable,” Codere stated.

Funding allocation

In terms of the €225 million funding allocation, super senior bonds worth €100 million will be released in the first instance by the end of May, with a €30 million immediate infusion accompanied by the remaining €70 million.

The second round of financing, totalling €125 million, will be used to bring the expected restructuring process to a close. Following the completion of this process, a new corporation will be formed to combine operating activities and to request the liquidation of the current Codere SA organisation.

Codere’s creditors would own 95 percent of the company, whereas current shareholders will own the remaining 5 percent. Current shareholders will also receive rights that allow them to own up to 15 percent of a purchase agreement greater than €220 million in a potential sale within ten years.

Majority shareholder support

Despite the fact that the liquidation decision has received “majority shareholder support,” an Extraordinary General Shareholders’ Meeting has been called to vote on the restructuring processes’ implementation.

The company continued: “With the implementation of this restructuring, which is expected to be concluded at the beginning of the fourth quarter of the year, Codere hopes to ensure the future of the company, thanks to the trust of its bondholders in the group’s prospects, in its management team and in the most of ten thousand employees that make up the organisation.”

In comparison to the €1.045 billion in earnings recorded in 2019, Codere’s Q3 2020 trading report revealed year-to-date corporate losses of up to €240 million, while company sales shrank by over 56 percent to €460 million.