Gateway Casinos Considers $1.8 Billion Private Debt Issue for Dividend Payouts

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Canada’s Gateway Casinos is reportedly contemplating the issuance of $1.8 billion in private credit to reduce existing liabilities and provide its owners with a dividend. Gateway Casinos London, one of 14 casinos in Ontario, may sell $1.8 billion in private debt. Bloomberg broke the news earlier today, citing unidentified sources familiar with the matter. According to these sources, the casino operator is collaborating with Morgan Stanley to find lenders interested in providing the financing. If approved, the transaction would be among the largest this year in Canada’s private debt markets. The gaming company might be seeking a non-public debt sale due to its low credit ratings.

In the private credit market, investors make loans to businesses and sometimes individuals who may have difficulty obtaining credit from banks or the public market. The most recent rating of Gateway debt occurred in November 2022, when Moody’s Investors Service upgraded its rating on the casino operator to “B3” from “Caa1.” The “B3” grade is six notches into junk territory at Moody’s.


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News of Gateway Casinos potentially heading to private debt markets surfaced about a year after speculation emerged that the operator was considering an outright sale, which did not materialize. Catalyst Capital Group, a private equity firm with over $6 billion in assets under management, took control of the gaming outfit following a 2009 acquisition. Gateway operates 31 gaming venues across Alberta, British Columbia, and Ontario. Last year, it was believed that Gateway was seeking $2 billion in a sale or slightly more than the $1.8 billion it could gross in a bond sale.

Assuming reports are accurate that the gaming operator is heading to private markets to raise cash, this transaction represents Catalyst’s latest attempt to monetize its stake in the Canadian casino giant. In December 2019, hedge fund HG Vora teamed up with Catalyst Capital and blank-check firm Leisure Acquisition Corp. to bring Gateway public at a $1.15 billion valuation, but the deal unraveled in June 2020.

Earlier this week, Great Canadian Entertainment, one of Gateway’s main competitors, marketed a $665 million term loan in the U.S. to raise cash to pay down debt with higher interest rates. Great Canadian is controlled by Apollo Global Management.

Speaking of Apollo, the private equity firm has shown that companies can pay themselves dividends from casino ownership. Earlier this year, Apollo asked Nevada regulators to approve a $550 million payout from the Venetian on the Las Vegas Strip. It remains unclear if Canadian regulators will approve Catalyst’s plan to pay itself a dividend through the issuance of Gateway debt. The key difference between that proposal and the Apollo/Venetian payout is that the latter was funded with cash flow.