Catalyst Capital Seeks $1.3B in Private Debt for Gateway Casinos

Gateway Casinos & Entertainment, a top casino operator in Canada, plans to raise CAD1.8 billion ($1.3 billion) in private debt. 

Gateway Casinos Wants to Reshape Debt and Reward Investors Amid Credit Constraints

People close to the matter say the company wants this money to reshape its current debt and give dividends to its shareholders, reported Bloomberg. Morgan Stanley, a big investment firm, is handling the deal. If it goes through, it would be one of the biggest private debt deals in Canada this year.

Morgan Stanley is looking at different loan possibilities to get Gateway Casinos good loan terms. Gateway Casinos run by Catalyst Capital Group, might change how much it borrows based on what lenders say. Catalyst Capital Group has owned most of Gateway Casinos since 2009. Last year, people said Catalyst Capital Group thought about what to do with the business. The company even considered selling it, however, nothing happened. 

Gateway Casinos might need private money because its credit score is not great. In November 2022, Moody’s raised Gateway Casinos’ score to “B3,” but that is still in the “risky” group. When scores are low, it is hard for companies to get money from the public so they often look for private loans instead.

In private credit markets, non-bank investors like private equity firms and hedge funds give loans to companies that might not get bank loans because of credit limits. The US has a $1.7 trillion private credit market, and this way of getting money has become more competitive as private lenders look for deals not easy to find in regular syndicated markets. Some firms are now going for riskier loans, as shown by recent deals such as the $750 million loan that Pure Fishing got.

Gateway Casinos Aligns Debt Strategy with Industry Trends

The time when Gateway Casinos issued its debt matches similar actions taken by other big gaming companies in Canada. Just days ago, Great Canadian Gaming Corporation, which Apollo Global Management owns, started a $665 million term loan in the US leveraged loan market. Great Canadian’s debt restructuring has the goal to cut down the interest on its outstanding debts, a plan Gateway might also think about through private debt markets.

Catalyst Capital has tried to make money from its Gateway Casinos investment before. In 2019, Catalyst and Leisure Acquisition, a special-purpose acquisition company, wanted to take Gateway Casinos public. They thought the company was worth about $1.15 billion. But this plan did not work out. So Catalyst Capital had to look at other ways to get cash, like private debt financing. If the current financing deal goes ahead, it would be Catalyst Capital’s newest attempt to get value from Gateway Casinos’ 31 casinos. These casinos are in Ontario, Alberta, and British Columbia.