Intralot SA
Intralot Risks 2024 Noteholders Litigation If It Proceeds With ‘J.Crew-Style’ Transfer of Assets Outside Restricted Group to Secure New Debt; Parties Disagree on Whether UK Scheme Would Trigger Event of Default Under 2024 Indenture
Fri 01/22/2021 11:28 AM
Relevant Documents:
2024 Notes - Full Covenant Report
2024 Notes - Final Offering Memorandum
2021 Notes - Full Covenant Report
2021 Notes - Final Offering Memorandum
An ad hoc group of Intralot’s 2024 noteholders could sue the Greek gaming group should it proceed with a J.Crew-style plan to transfer the U.S. business Intralot Inc. out of the 2024 notes’ restricted group and release its guarantee to implement its proposed debt restructuring, sources told Reorg. Continue reading for the EMEA Core Credit by Reorg team's update on Intralot, and request a trial for coverage of debt restructuring situations in the region.
The company extended the deadline for the 2021 bondholders to accede to the lockup agreement to Feb. 1, 2021, this morning. Investors expect that the decision is to allow more time to reach a 90% consent for amendments threshold and therefore avoid the requirement to use a scheme of arrangement to implement the proposed debt restructuring of the 2021 notes.
It is not clear whether using a scheme of arrangement would constitute an event of default under the 2024 indenture causing the notes to be automatically accelerated. According to sources, some of the 2024 noteholders are of the view that it would, but Reorg understands that the company has interpreted the 2024 notes indenture differently.
If the 90% threshold for the 2021 noteholders is reached and the company moves to implement the deal without a scheme, the 2024 noteholders could still pursue litigation on the basis that the proposed deal would require the consent of the 2024 notes. The argument of the 2024 notes would be that the €205 million new secured money being offered to the 2021 noteholders breaches the debt incurrence covenants in the 2024 notes.
The 2024 ad hoc bondholder group said on Jan. 15 that it looks forward to engaging immediately with the company in connection with the proposed debt restructuring to determine whether the term of a consensual restructuring transaction can be reached.
Intralot proposed a debt restructuring deal on Jan. 14 , which featured swapping €250 million of the 2021 subordinated notes into €205 million of senior secured notes due 2025 and a tender offer for the 2024 noteholders to swap part of their debt into up to 49% equity of the U.S. business of the group. The deal also features a stake of 18.7% stake in the U.S. business, cash fees in exchange for €68 million of the 2024 notes for cross-holders.
The company has not commented in any detail on how it plans to implement the proposed deal but since it does not have more than €100 million of capacity for the restricted group to incur secured debt under the 2021 and 2024 notes, moving Intralot Inc. outside the restricted group could be an option.
However, this is problematic as it would make the remaining 2024 notes structurally and contractually subordinated to the 2021 notes, when they are currently ranked pari passu.
The current proposal is below:
Additionally, a structure with an original Intralot restricted group for the 2024s and a new Intralot U.S. restricted group for the 2021s would mean that the original restricted group would have a reduced ability to service and ultimately redeem or refinance the remaining 2024 notes.
On the other hand, unlike the 2021 noteholders, who under the deal are being given a €45 million haircut on their debt, 2024 noteholders who hold out could get full repayment at their maturity if the company manages to refinance its debt successfully then, some sources said.
Read Reorg’s full covenant legal analysis on Intralot’s ability to incur the proposed €205 million of senior secured debt HERE.
--Aurelia Seidlhofer, Connor Lovell
2024 Notes - Full Covenant Report
2024 Notes - Final Offering Memorandum
2021 Notes - Full Covenant Report
2021 Notes - Final Offering Memorandum
An ad hoc group of Intralot’s 2024 noteholders could sue the Greek gaming group should it proceed with a J.Crew-style plan to transfer the U.S. business Intralot Inc. out of the 2024 notes’ restricted group and release its guarantee to implement its proposed debt restructuring, sources told Reorg. Continue reading for the EMEA Core Credit by Reorg team's update on Intralot, and request a trial for coverage of debt restructuring situations in the region.
The company extended the deadline for the 2021 bondholders to accede to the lockup agreement to Feb. 1, 2021, this morning. Investors expect that the decision is to allow more time to reach a 90% consent for amendments threshold and therefore avoid the requirement to use a scheme of arrangement to implement the proposed debt restructuring of the 2021 notes.
It is not clear whether using a scheme of arrangement would constitute an event of default under the 2024 indenture causing the notes to be automatically accelerated. According to sources, some of the 2024 noteholders are of the view that it would, but Reorg understands that the company has interpreted the 2024 notes indenture differently.
If the 90% threshold for the 2021 noteholders is reached and the company moves to implement the deal without a scheme, the 2024 noteholders could still pursue litigation on the basis that the proposed deal would require the consent of the 2024 notes. The argument of the 2024 notes would be that the €205 million new secured money being offered to the 2021 noteholders breaches the debt incurrence covenants in the 2024 notes.
The 2024 ad hoc bondholder group said on Jan. 15 that it looks forward to engaging immediately with the company in connection with the proposed debt restructuring to determine whether the term of a consensual restructuring transaction can be reached.
Intralot proposed a debt restructuring deal on Jan. 14 , which featured swapping €250 million of the 2021 subordinated notes into €205 million of senior secured notes due 2025 and a tender offer for the 2024 noteholders to swap part of their debt into up to 49% equity of the U.S. business of the group. The deal also features a stake of 18.7% stake in the U.S. business, cash fees in exchange for €68 million of the 2024 notes for cross-holders.
The company has not commented in any detail on how it plans to implement the proposed deal but since it does not have more than €100 million of capacity for the restricted group to incur secured debt under the 2021 and 2024 notes, moving Intralot Inc. outside the restricted group could be an option.
However, this is problematic as it would make the remaining 2024 notes structurally and contractually subordinated to the 2021 notes, when they are currently ranked pari passu.
The current proposal is below:
Additionally, a structure with an original Intralot restricted group for the 2024s and a new Intralot U.S. restricted group for the 2021s would mean that the original restricted group would have a reduced ability to service and ultimately redeem or refinance the remaining 2024 notes.
On the other hand, unlike the 2021 noteholders, who under the deal are being given a €45 million haircut on their debt, 2024 noteholders who hold out could get full repayment at their maturity if the company manages to refinance its debt successfully then, some sources said.
Read Reorg’s full covenant legal analysis on Intralot’s ability to incur the proposed €205 million of senior secured debt HERE.
--Aurelia Seidlhofer, Connor Lovell
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