Gateway Casinos shops C$170 million secured issue; pricing this week

By Paul Deckelman

New York, Nov. 1 - Gateway Casinos & Entertainment Ltd. was heard by high-yield syndicate sources on Monday to have begun shopping around a C$170 million offering of seven-year second-priority senior secured notes.

The issue is expected to price sometime this week.

The bookrunners on the deal are RBS Securities Inc., Jefferies & Co. Inc., J.P. Morgan Securities LLC, Goldman Sachs & Co. and Morgan Stanley & Co. Inc.

A source noted that the underwriting group for the Burnaby, B.C.-based gaming company includes "no Canadian dealers" and said that some investment bankers with Canadian institutions were miffed at the apparent exclusion. He described them as "upset."

The deal is being marketed under Rule 144A for life and Regulation S.

The bonds will have three years of call protection, with a provision for a make-whole call at 50 basis points over the comparable Canadian Treasury issue. Unusually, the first call price would be at par plus three-quarters of the bonds' coupon.

The notes will be guaranteed by all of the company's future restricted subsidiaries and will be secured by a second lien on all material assets that now secure its term loan and revolving credit borrowings.

Gateway, which is currently lining up a C$385 million credit facility, plans to use the combined proceeds from the bond and bank borrowing to refinance existing credit facility debt incurred as part of its recently completed pre-negotiated restructuring process.

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