Codere Creditors Say New Insolvency Law Backs Restructuring Plan

Codere SA creditors said changes to Spain’s insolvency laws support its offer to restructure 1.1 billion euros ($1.5 billion) of debt that was rejected by the Spanish gaming company.

New bankruptcy rules came into effect on March 7, making it easier for troubled companies to avoid liquidation. The legislation encourages debt-for-equity swaps by threatening to make shareholders liable if they “unreasonably withhold” consent, Codere’s bondholders wrote in a letter to the company’s board of directors today.

An amended final offer will be submitted by creditors in the coming days that will include changes prompted by the new law, according to the letter, which was sent by investors representing about 50 percent of Codere’s euro and dollar notes. The company’s 660 million euros of 8.25 percent notes due 2015 were quoted at 49 cents on the euro, down from 50 yesterday, according to Bloomberg prices.

“The board and the shareholders must now play their part in stabilizing and securing the future of the company or else risk being held legally responsible for its failure,” bondholders said in the letter. “Shareholders can no longer unreasonably hold out.”

Italo Durazzo, a spokesman for Codere in Madrid, declined to comment on the letter.

Bondholders are demanding control of 82.5 percent of Codere’s equity while shareholders, led by the founding Martinez Sampedro family, are offering as little as 20 percent of the manager of betting parlors and race tracks in Spain, Italy and Latin America.

The new law was introduced to prevent companies entering full creditor protection, known as concurso. About 95 percent of companies that enter the process end up in liquidation, according to the Madrid-based Colegio de Registradores, which tracks company registrations.

Codere sought preliminary creditor protection on Jan. 2, giving the company four months to agree a restructuring plan or start insolvency proceedings.

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