Codere SA, the massive international gaming operator based in Spain, may become a casualty of the coronavirus pandemic. Analysts with Spain’s Bolsa Madrid stock exchange are watching the company closely after a Spanish newspaper, El Confidencial, reported that it is on the verge of bankruptcy. Codere has reportedly solicited the help of global banking giant Credit Suisse to secure financing prior to May 31, or it will be in a disastrous situation.
May 31 marks the very last day Codere has to make a payment on an outstanding loan. The deadline was already extended a month because of the current global economic situation, but additional extensions are apparently not going to be permitted. According to the news outlet, Codere is looking to secure €100 million (about $108 million) to cover its debt after it was forced to temporarily shutter its operations in all of the markets where it’s active, including Spain, Italy, Mexico, Colombia, Uruguay, Panama and Argentina.
Codere announced toward the beginning of last month that it had already brought in Bank of America (BoA) to try to help it find the necessary money. There were reports that it could only survive on its own for four months with no relaunch of gaming operations, but the continued shutdown is making things more difficult as each day passes. With apparently no substantial relief found with the assistance of BoA, another heavy-hitter was forced to be brought in.
Codere says the delay of the payment is just part of its “contingency plan” as the company continues to “deploy to ensure business continuity and preserve its liquidity position in the face of the current crisis caused by the coronavirus.” However, that may be a smokescreen, and Standard & Poor’s explains that it is really the first sign of a risk of a company going into default. Codere will have to pay an abnormally high interest rate – more than 10% – on the money it receives, and this is going to be difficult for investors to swallow. The company is currently losing about $25 million each month its operations stay closed.
Codere is currently backed by several funds, including Silver Point, Abrams Capital and M&G. Should more deep-pocketed investors be brought into the mix, these latest to sign on would expect to be paid out first if the company were forced into bankruptcy. That alone would cause an uproar, but the new backers would most likely want to find additional collateral offered by the existing backers – something they might not be willing to do.
Codere has had difficulty finding its footing since it went through a bankruptcy restructuring five years ago. At that time, it found financing of about €900 million ($973.6 million) to help it get back on its feet, but it has struggled to perform up to expectations since that time. The banks may try to convince current backers to extend debt maturity terms, but they may determine an asset sell-off is the best option for them to recuperate their investments.
