Gateway Casinos & Entertainment closed a $1.25 billion senior secured term loan B issuance to refinance its capital structure and fund cash to the balance sheet. Funds managed by affiliates of Fortress Investment Group were lead investors in the transaction.

“We are very pleased to have completed this significant refinancing with Fortress as the lead investor,” Gabriel de Alba, executive chairman of Gateway Casinos & Entertainment, said. “As Gateway reopened its operations in the third quarter, the company’s focus on operational discipline, including a more streamlined cost structure, and our focus on our guest experience, has led to performance that has exceeded our expectations. The company’s ability to move so quickly after such severe restrictions is testament to our leadership team and employees and our focus on preserving as much liquidity as possible throughout the pandemic, including through the assistance of the Canadian government’s LEEFF program. We are grateful for the ongoing support of all our stakeholders and regulatory partners and proud to have now strengthened our capital position, which will support our future growth initiatives, including online gaming opportunities.”

“Gateway is a unique gaming and entertainment company that, since reopening in British Columbia and Ontario following an extended period of closure due to the COVID pandemic, has generated higher property level operating margins and adjusted EBITDA than expected,” Tony Santo, CEO of Gateway Casinos & Entertainment, said. “We appreciate the support of our new lenders, as the refinancing of our entire capital structure and the repayment of the full amount that was outstanding on our LEEFF loan facility has positioned the company with the financial flexibility to continue delivering excellent customer experiences in gaming, food and beverage and entertainment at our properties, restarting our development projects and driving performance that can continue to support further deleveraging of our capital structure.”

“Gateway has done an exceptional job in navigating and emerging from a historically challenging period,” Josh Pack, managing partner at Fortress Investment Group, said. “We are thrilled to provide Gateway with a capital solution that will position the company for profitable growth and success in the years ahead.”

The senior secured term loan B carries both $1,073,150,000 and C$218,640,000 denominated term loan tranches, which mature six years from the closing date, providing Gateway with maturity runway and additional liquidity to fund its operations.

Pricing of the U.S. dollar denominated term loan is tied to the secured overnight funding rate (SOFR) plus a credit spread adjustment (CSA) of 10 basis points for the one-month rate and 15 basis points for the three-month rate. The U.S. dollar denominated term loan carries a coupon of SOFR plus CSA plus 800 basis points, while the Canadian dollar denominated term loan carries a coupon of CDOR plus 800 basis points. Both term loans carry 0.75% floors and 1% amortization per annum and were issued at 98 OID. During the initial 18 months post-closing, Gateway maintains the option to PIK up to 300 basis points of the term loans’ coupons, subject to a 150-basis point premium.

The term loans provide Gateway the flexibility to voluntarily prepay at 103%, 102% and 101% of principal amount in the first three years post-closing, respectively, and include a special optional redemption right at 101% of par for up to $400 million using proceeds from a qualified equity issuance or in connection with a merger or sale.

Gateway used net proceeds from the transaction to refinance existing corporate debt at both Gateway Casinos & Entertainment and GTWY Holdings, including the employer emergency financing facility loan the company agreed to in September 2020.

In connection with this refinancing transaction, Gateway received a corporate credit rating upgrade at Moody’s to Caa1 with a positive outlook.

Morgan Stanley Senior Funding served as sole lead bookrunner for the transaction and Fortress Credit and Morgan Stanley Senior Funding served as joint lead arrangers.