Gateway Casinos & Entertainment Limited Completes Refinancing of Corporate Debt in USD $1.25 Billion Transaction

Gabriel de Alba, Executive Chairman of Gateway, said, “We are very pleased to have completed this significant refinancing with Fortress as the lead investor. As Gateway re-opened 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.”

Tony Santo, Gateway's Chief Executive Officer, said, “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. 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,” said Fortress Managing Partner Josh Pack. “We are thrilled to provide Gateway with a capital solution that will position the company for profitable growth and success in the years ahead.”

Transaction Details:

The Senior Secured Term Loan B carries both USD (US$1,073,150,000) & CAD (C$218,640,000) denominated term loan tranches, which mature 6 years from the closing date, providing Gateway with significant maturity runway and additional liquidity to fund its operations.

Pricing of the USD 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 bps for the three-month rate, marking it as one of the first institutional term loans to be issued using SOFR pricing starting at the closing date. The USD denominated term loan carries a coupon of SOFR+CSA+800 bps, while the CAD denominated term loan carries a coupon of CDOR+800 bps. Both term loans carry 0.75% floors, 1.00% amortization per annum, and were issued at 98.00 OID. During the initial 18 months post-closing, Gateway maintains the option to PIK up to 300 bps of the term loans’ coupons, subject to a 150 bps 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 US$400MM using proceeds from a qualified equity issuance or in connection with a merger or sale.

Net proceeds from the transaction were used to refinance all of Gateway’s existing corporate debt at both Gateway Casinos & Entertainment Limited and GTWY Holdings Limited, including the Large Employer Emergency Financing Facility loan agreed to in September 2020, simplifying the Company’s capital structure.

In connection with this refinancing transaction, Gateway received a meaningful corporate credit rating upgrade at Moody’s to Caa1 (Positive Outlook).

Morgan Stanley Senior Funding, Inc. served as Sole Lead Bookrunner. Fortress Credit Corp. and Morgan Stanley Senior Funding, Inc. served as Joint Lead Arrangers.