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Spain – Codere fights for its life

By - 20 May 2014

The warring factions of Codere’s major shareholders, including the Martínez Sampedro family and creditors who are owed €1.1bn, are seeking to reach an agreement today to save the company, whose majority stake is likely to pass to bondholders, allowing the current president to retain control of management. Should the agreement fail, then Codere faces bankruptcy.

Negotiations are due to be finalised that build upon an extension granted on April 31, 2014 which ensures the company does not enter into voluntary bankruptcy. About 95 per cent of companies that enter insolvency proceedings in Spain, known as concurso under the country’s bankruptcy laws, end up in liquidation, according to the Madrid-based Colegio de Registradores, which tracks company registrations.

Codere sought preliminary creditor protection in January after reporting seven consecutive quarters of losses. The co-founding Martinez Sampedro family is fighting to retain as much control as possible in the company hurt by recessions and higher taxes in its European markets as well as stricter gambling regulations and smoking bans in Latin America.

Siblings Jose Antonio Martinez Sampedro, Luis Javier Martinez Sampedro and Encarnacion Martinez Sampedro own 68.5 per cent of Codere, which manages betting parlours and race tracks in Spain, Italy and Latin America.

In Codere’s latest restructuring proposal, bondholders would get 70 per cent of the company’s equity while shareholders would hold 30 per cent. Note holders, however, want an 82.5 percent stake in the company, offering 14.3 percent to Chief Executive Officer Jose Antonio Martinez Sampedro and family members and 3.2 percent to other shareholders. This has been the most important point of discussion, as the president flatly refused to give more than 51 per cent

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of the equity to note holders.

The company had previously turned down a bondholder plan that included cancelling €365m of the group’s €1bn of bonds, and injecting as much as €400m of new money. The proposal would have seen creditors receiving 96.8 percent of the company’s equity.

The final percentage is expected to be much lower and will include the creation of a new instrumental vehicle whose board will be dominated by the family. In turn, the debt holders are expected to provide €200m of new money and provide a one-off payment of €350m, which would enable Codere to continue as a viable concern. This, however, is speculation right now.

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