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Blackjack at the River Rock Casino in Richmond, B.C. June 11, 2009. The Great Canadian Gaming Company. John Lehmann/Globe and Mail

JOHN LEHMANN/The Globe and Mail

Five years after getting wrapped up in a $1.4-billion private equity buyout, Gateway Casinos and Entertainment is ready to be a public company once again.

The Burnaby, British Columbia-based casino and gaming operator has filed a preliminary prospectus for an initial public offering, capping off a turbulent five year history during which the company was loaded up with debt and then forced to restructure right after the worst of the credit crisis.

Details of the new offering are still being completed, so a final size and yield have yet to be determined, but the deal should include both treasury and secondary portions, and it's bound to be served up with a juicy yield because that's what catches investors eyes now.

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However, the company has already disclosed that about $77-million will go toward repaying term loans and another $60-million will be used to redeem notes, totalling at least $136-million. So the offering should be north of the $100-million mark at least.

Rumours the company would pursue a public offering had circulated for a few months, after Newton Glassman, the head of distressed debt firm Catalyst Capital signalled in a interview with the Globe that he was looking to raise capital.

Mr. Glassman first set his eyes on Gateway around 2007, and in 2009 his company picked up some debt and subsequently took control of the company. The firm has since picked away at $1-billion in debt and Mr. Glassman joined the company's board.

Proceeds from the IPO will be used to continue reducing debt and to complete Gateway's refinancing process. The company will then invest some of its cash flow into growth opportunities by way of new projects and acquisitions.

From the initial report it appears Gateway is intending to issue a dividend and has earmarked about $69-million for payments. It's still early days on that decision, but offering a quarterly dividend would separate Gateway from major competitor Great Canadian Gaming Corp., which doesn't have one.

At a glance, it appears that market conditions are favourable for the company's expansion. In the five years leading up to 2011, BC's gaming revenue grew from $2.3-billion to $2.7-billion, and across Canada the gaming industry has more than doubled in size over the past 15 years.

But that doesn't mean everything is rosy. Talks are ongoing with the British Columbia Lottery Corp., which has not yet approved the company's plan to develop a hotel, convention centre and gaming facility on the South Surrey property it acquired in February. Gateway also cautions that heavy concentration in Greater Vancouver, upcoming lease renewals and the fact that more than half its staff are covered by collective bargaining agreements could all change management's plans for the future.

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Gateway is already one of the largest casino operators in Canada with 12 gaming properties located in British Columbia and Alberta (primarily Edmonton). That amounts to nearly 400,000 square feet of space that houses 5,568 slot machines, 41 poker tables and 577 bingo seats.

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About the Author
Financial Services Reporter

Jacqueline Nelson is a financial services reporter at the Report on Business. Prior to that she was a staff writer at Canadian Business magazine, covering news and writing features on a wide variety of subjects. More

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