The history of gaming operator Gala Coral reads like a chapter on financial practices of the past decade. Born in a management buyout, raised on ambitious acquisitions and ultimately owned by a private-equity consortium, the group is likely to end half in the hands of lenders.

The private equity companies that own Gala Coral are said to be prepared to trade lenders half the company in exchange for writing off loans worth £540 million-about $860 million.

The deal would see owners Candover, Cinven and Permira relinquish up to 50 percent of the bingo, casino and betting operator to a group of lenders headed by investment groups Intermediate Capital and Park Square, according to the Times. Negotiations are under way, with a result expected by the end of October.

The three private equity firms put an additional £125 million into Gala Coral last year to relieve some of the pressure, according to news source EGR.

Gala Coral has been stuck servicing a total debt of £2.6 billion at a time when revenue has been hit by the poor economy and a smoking ban. The company has closed half a dozen bingo clubs in recent months, and now faces an increase in bingo tax, from 15 percent to 22 percent.

In an interview with U.K. news site Bingo Hideout in August, Gala Coral chairman Neil Goulden said, "Of course we want to strengthen our weaknesses. We are at the moment a great company with a bad balance sheet. Debt is not necessarily a bad thing, but ours is maybe too high for a modern climate. We need to clear some of the debt so that we can free up cash flow. We have £250 million in the bank but we can't spend it-and we need to be able to do so, so that we can grow the business."

Gala Coral has a new business plan by which £550 million would be repaid over the next three years, as well as £500 million paid in interest, according to the Times.

By GGB Staff

Staff writers for Global Gaming Business magazine. Las Vegas, Nevada.