It was a week of bad news and good news for Caesars Entertainment. While the company faced scrutiny by a court-appointed panel of investigators looking into the transactions that positioned it for restructuring of its largest unit, Caesars Entertainment Operating Company (CEOC) in that unit’s bankruptcy case, the operator faced fines in a federal money-laundering probe.
Meanwhile, Caesars Entertainment reported first-quarter earnings that were the strongest since the operator was taken private by equity firms Apollo Global Management and TPG Capital Management in 2008.
U.S. Bankruptcy Judge Benjamin Goldgar was expected to rule today on creditors’ requests for access to internal communications related to several transactions in which Caesars Entertainment moved valuable assets including Planet Hollywood and Caesars Atlantic City into a real-estate investment trust, key moves preparing for a restructuring deal with first-lien creditors that could shave $10 billion off CEOC’s $18 billion in debt.
Lower-level creditors have claimed in lawsuits and before the bankruptcy judge that the transactions—and Caesars’ cancellation of repayment guarantees on lower-level bonds—were illegal, and left second-lien bondholders with no recourse to recover most of their investments. Caesars officials said last week they will agree to grant access to the records through an independent examiner.
Caesars officials, meanwhile, were in discussions with U.S. authorities to settle alleged violations of anti-money laundering rules by Caesars Palace in Las Vegas. The company disclosed the talks, being held with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), in its quarterly filing with the Securities and Exchange Commission.
Caesars has been cooperating with the federal probe into alleged violations of the Bank Secrecy Act since October 2013. The operator could face fines between $12 million and $20 million associated with probe. Caesars officials are reportedly seeking a settlement.
The good news for Caesars is that first-quarter revenues were $2.2 billion, up 8.8 percent from the first quarter of last year. That includes financial results CEOC which filed for bankruptcy on Jan. 15. Without including the operating division, Caesars’ net revenue for the quarter was $1.1 billion, up 21 percent from the same time period a year ago.
On a conference call with analysts, outgoing Caesars CEO Gary Loveman said the company had its best quarterly performance since 2008. He said Caesars has cut costs, made “new and exciting” investments in its hospitality offerings and continued to make investments in Caesars Interactive.
“The combination of our efforts to increase revenue and further reduce spending led to significant margin expansion in the first quarter, and fuels my optimism for the long-term potential to return and sustain pre-crisis margin levels,” he said.
“I am excited about the future of Caesars Entertainment,” added incoming Caesars CEO Mark Frissora, who begins in his new position July 1. “Despite the fact that Caesars has faced a tough operating environment, I have been encouraged by the high engagement level of our employees and their strong focus on serving our customers.”
