Codere faces a new bond maturity date this week

The group, controlled by the Martínez-Sampedro family, has to pay 31 million euros on interest of 76 % of the total debt volume.  But as recently happened with a special liquidity line granted by several hedge funds, the company lacks the funds to make the payment.
 
The ‘d-day’ of the Senior Revolving Credit Facility facilitated by GSO Capital Partners, Blackstone Group and Canyon Partners last Summer was resolved last week, with the result that the “vulture funds” have extended the amortization date of the 127.1 million borrowed until February 6th. This could be further extended until June 15th if Codere “complies with certain conditions linked to achieving a restructuring plan accepted by 50% of bond holders that can be implemented before April 15th, 2014”.
 
However, the investors that purchased the bonds are not being so naive after witnessing how the company has failed to come up with a serious proposal since the first payment date of the debt maturity last December 15th. On that day, Codere took advantage of the grace period to delay the payment of the coupon until January 15th. Since then, the company has not produced a refinancing plan that has convinced the hedge funds.
 
There appear to be three possible scenarios.  First, the Martínez-Sampedro family could still present a realistic restructuring plan. Second, a default can occur where bond- holders accelerate the execution of guarantees thus becoming direct owners of the company. The third and less probable scenario is that the two parties agree on more time to negotiate without asking for anything in return .

For all the difficulties it finds itself in, Codere is experienced in getting itself out of holes such as it did on August 15th when the first  selective default took place. Then the company once again activated the grace period and on September 15th managed to pay off its interest thanks to a special credit line granted by GSO, Blackstone and Canyon. The payment was made two days after the deadline so the lenders could charge the default risk or Credit Default Swap (CDS), an operation through which they received almost 400 million euros.
 
Now that CDS is barely applicable to Codere, it is going to be hard for the firm to perform the sort of triple back somersault it pulled off last September. The proposal presented by the bondholders and the “vulture funds” is to redeem the debt by the 85 % of the capital of the group, whose remaining 15 % would belong to Martínez-Sampedro to continue as managers. In order to protect against possible legal actions, the company has already demanded the pre-meeting of directors, which expires at the beginning of April.
 
The family also faces its own problems. It owes almost 500 million euros on a  payment in kind loan granted in 2007 by Credit Suisse, now in the hands of numerous vulture funds.