Moody's Investors Service downgraded € 500 million and US $ 300 million Senior Secured Bills Codere SA, following a restructuring agreement reached between the Spanish operator and its creditors last week.
The rating agency decided to downgrade the above two priority securities from Caa3 to Ca, in addition to the € 250 high priority bonds, which were downgraded to Caa1 from B3.
In addition to downgrading the senior notes - both of which were issued by Codere Finance 2 (Luxembourg) SA and due 2023 - Moodys also downgraded the company's corporate family rating (CFR) to Ca from Caa3 and probability of default (PDR) to C. -PD from Caa3-PD.
The Caa1 instrument has also been assigned a € 100 million 2025 bridge note to be issued in two tranches of Codere Finance 2 (Luxembourg) SA, while the outlook for all ratings has been revised from negative to stable.
Moody's decision to downgrade Bolsa madrid gambling group bets are in accordance with the agreement secured last week between the operator and its lenders, who will see the firm benefit from a € 225 million cash injection and go into liquidation.
The first tranche of financial support will take place in two separate phases in May in the form of € 30 million following the signing of the lockdown agreement, followed by another 70 million euros.
The second tranche, consisting of the remaining EUR 125 million, will be transferred to the company before the completion of the planned restructuring process.
In addition, as part of the proposed restructuring, the € 500 million and € 300 million senior secured bonds will be exchanged for the € 135 million recovered senior secured bonds and million PK 226 million subordinated banknotes and 95% of New Topco's registered capital.
An additional clause to the agreement would result in Codere's lenders capitalizing more than € 350 million, which is in line with the existing senior guaranteed bonds.
The deal builds on a previous agreement between Codere and its creditors that allowed the operator defer debt repayment from 2021 to 2023 - these were in turn extended again last week until September 2026 and November 2027, respectively.
Moody's said that "it will most likely view the extension of the maturity of the super-priority bonds and the swap of debt for shares on the senior secured bonds as an exchange of distressed securities."
Moody's originally expected Codere to run out of cash by the end of April 2021 '. However, the rating agency now estimates that the € 30 injections in April and € 70 million in May will give Codere more time to restructure its debt. "
On the other hand, while Moody's is now confident that the agreement with the lender will help Codere in restructuring its debt and reorganizing its business, the financial services provider “believes that the sustainability of the proposed structure remains a key issue, as interest in kind will grow rapidly and the prospects for EBITDA growth relatively limited in the next two years. "
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