Codere Announces Fifth Restructuring To Cut Debt By 92%

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Codere, the Spanish gaming giant that’s the parent of Codere Online Luxembourg (NASDAQ: CDRO), announced a fifth restructuring agreement Thursday that will result in the elimination of 92% of its debt.

Under the terms of the pact with creditors, the gaming company’s debt will decline to $138 million from $1.72 billion, with investors who hold Codere’s super senior notes taking control of the company. That doesn’t mark a significant change in control of the firm because many of those investors make up a majority of Codere equity owners.

The transaction so far has support from more than 60% of all creditors and shareholders,” reports Bloomberg. “Creditors have until June 25 for subscribing to provide the bridge notes that will allow the company implement the deal, and until July 9 to accede the lockup agreement and deliver instructions in connection with the Spanish restructuring plan.”

Following the transaction, Codere’s debt/earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio will decline to a more tolerable 0.9x.

Despite Debt Woes, Codere Stock Surging

The operator, formerly known as Grupo Codere — Codere Online’s parent — is undergoing a dramatic alteration in Spain. Now known as Nueva Codere, the company sold some assets in Argentina and spun off the online business as part of its makeover

In fact, bumpiness in Argentina and Mexico — two of the operator’s crucial markets — is one reason why Codere has struggled to get a handle on its debt burden. Conversely, shares of the US-listed stock have performed exceptionally well. The stock is up nearly 140% since the start of the year.

Codere Online debuted as a publicly traded company on Dec. 1, 2021, following a merger with a special purpose acquisition company (SPAC), DD3 Acquisition Corp. II. Despite that ascent, Codere isn’t highly familiar with many US investors owing in large part to the operator’s focus on Latin America. Just three sell-side analysts cover the stock.

In that region, Codere Online is operational in Argentina, Colombia, Mexico, and Panama. Likely owing to home country bias, many US investors aren’t aware of the wagering opportunity in Latin America, but online gaming there notched an eight-year compound annual growth rate of about 20% in Codere’s core markets.

Debt Stability Could Be Boon for Codere

The dramatic reduction in Codere’s debt could bring much-needed stability to the company with equity investors likely hoping the fifth time is the charm.

It’s possible that with the debt burden lowered, the broader investment thesis will be cleaned up and garner more attention. Analysts appear to see value in the stock as their average price target implies upside of 64.3% from Thursday’s close.

Codere has been rumored to be a takeover target in the past and it’s possible the debt restructuring could renew interest on that front, but that remains to be seen.

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