Moody’s Cuts Gala Bingo’s Debt Rating

Moody’s Investor Service is a credit rating agency that has been in the news a lot during the last three years. Two years ago Moody’s downgraded the credit rating of Greece with disastrous results for the Euro. Moody’s ratings carry a lot of weight and can affect the credit rating of any nation or private company. Recent bingo news reports say that Gala Coral, the parent company of Gala Bingo, has applied for loans totaling 900 million pounds ($1.5 billion USD) to repay maturing debt. The action prompted Moody’s to give Gala a ‘highly speculative’ debt rating.

Gala is trying to raise £800 million pounds ($1,313,504,900.20 USD) in a seven year loan paying 5% more than the London interbank interest rate. Gala may offer high-yield bonds as part of their refinancing program.  According to a Bloomberg report Barclays Capital, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc. and Morgan Stanley are arranging the deal for Gala Coral. Last month Moody’s cut Gala’s rating on level to B3 which had an adverse on the cost Gala will have to pay for borrowing and may deal a serious blow to the bingo giant.

Moody’s predicts that Gala’s performance for the year up to September 2011 will be “significantly worse than expected.” Most credit rating agencies assign letters to different levels of debt with A being prime grade debt. Moody’s uses a scale from A through C and Gala’s rating of B3 is just above the lowest level of C. Many gaming experts expected Gala to make progress in dealing with its debt but recent developments make it less likely that Gala will improve its financial position.

Last year lenders took control of Gala and exchanged debts for equity. Gala has been the subject of several news reports during the past three years as the company struggles with mounting debt. High debt levels have been holding Gala back and the company hopes the debt restructuring will put the company in a better financial position. Gala is one of the largest bingo operators in the United Kingdom. In addition to several land based bingo halls throughout the UK Gala also has a huge online bingo operation and own the Gala bingo site. Like many land based companies struggling with the effects of the smoking ban Gala set up a branded bingo site to remain profitable. This year may be a ‘make or break’ year for many bingo sites and it is anybody’s guess whether Gala will survive.

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