Blackstone reviews CIRSA options as pandemic wipes out IPO potential

US private equity fund Blackstone Group has moved to safeguard its investment in Spanish gambling operator Grupo CIRSA purchasing €120 million of the firm’s debt notes.

Last week, CIRSA published headline Q1 trading figures, revealing that company growth had been wiped out during March, with the company being forced to shut down its entire retail presence across Spain and South America

Navigating COVID-19 headwinds, CIRSA saw group operating profits fall by 14% to €89 million, stating that the global pandemic had ‘interrupted all core CIRSA business units’.

In a separate investor call, CIRSA would disclose that Blackstone had sanctioned a €120 million transaction safeguarding corporate debts notes that had sunk in value below 40%.

Spanish business news sources report that Blackstone has been forced to rethink CIRSA prospects, a gambling asset the US PE firm acquired in 2018 for €2 billion from the Lao Hernández family.

Refinancing its asset, Blackstone will no longer pursue an IPO for CIRSA, which was branded as the fund’s desired outcome, floating the world’s largest Spanish-language gambling operator.

Of further concern, during 2019 CIRSA expanded its corporate debt by €400 million, following an aggressive M&A strategy in which it acquired bookmaker Sportium from joint venture partner Ladbrokes and Spanish retail fruit machines vendor GiGA Games.

CIRSA investments see the firm trade at a current debt ratio of 4.6X its operating income (473m for FY 2019), a factor that will increase as COVID-19 wrecks the firm’s 2020 expectations.

Despite its woes, CIRSA cannot be branded as Spanish gambling’s biggest liability, as main market rival Codere SA fights for its survival, unable to pay its monthly debt coupons.

Unable to raise further capital from US debt holders, market eyes have turned to company chairman Norman Sorensen’s, and whether he will trigger a fire sale of Codere’s LATAM assets at a discounted value.

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