Credit ban on private equity?

Private equity-owned gambling group Gala Coral has accused credit insurer Euler Hermes of "appalling behaviour" in withdrawing cover against unpaid bills to Gala Coral's suppliers, the FT reports.

Drinks and packaging suppliers to Gala Coral were denied because insurers are worried about the future of companies backed by private equity, according to people close to Permira, Candover and Cinven, the gambling group's owners, the FT said.

But it reported people close to Euler Hermes saying the withdrawal of cover was linked to Gala Coral's debt problems and refusal to supply information.

The company has net debt of £4.3bn, and last year made a pre-tax loss of £397m, while it received £125m from its backers to prevent it from breaching covenants.

A US distressed debt specialist, Apollo, began to buy large portions of the company's debt at significant discounts late last year. This and the fact that requests to see management accounts were denied prompted Euler Hermes' action, said the people close to the company.

Neil Goulden, Gala Coral's chairman, denied the claim telling the FT: "We have had absolutely no contact with Euler Hermes at any time. This is random targeting of private equity companies, which is appalling behaviour by them, and the government should do something about it.”

The FT said the British Private Equity and Venture Capital Association reported most of its members that were having credit insurance problems had portfolio companies in property or leisure.

"This is very much a sectoral rather than generic private equity issue," one private equity executive said. "We haven't heard private equity people complaining in general about this problem."