A standoff between senior creditors that threatened to wreck the Chapter 11 reorganization of Caesars Entertainment Operating Co. has been resolved.
Bank and bond lenders to the debt-laden casino giant, the largest subsidiary of Caesars Entertainment Corp., dropped their objections to the reorganization plan after Caesars revised it in a filing in U.S. Bankruptcy Court in Chicago, according to a report by Bloomberg.
The banks had been demanding changes to provisions governing $2 billion in new debt that Las Vegas-based Caesars would issue to the group as part of the reorganization, while senior bondholders opposed those changes, people familiar with the dispute told Bloomberg.
A resolution was reached just hours before the lenders would have been able to walk away from the plan.
Both contending groups have endorsed an agreement with lower-ranking creditors and Apollo Global Management and TPG Capital, the private-equity firms that indirectly own CEOC, that forces Apollo and TPG to give up control of the company and its non-bankrupt parent in exchange for canceling about $10.5 billion worth of the $18 billion that CEOC owes them. The plan calls for splitting CEOC into a REIT and a casino operating company majority also held by creditors.
The banks are in line to get $6.3 billion in the restructuring, or 115 percent of their claims, according to court documents. The bondholders, who also have a priority claim on the company’s assets and are estimated to recover about 109 percent of what they’re owed, had argued the banks’ proposed changes could potentially reduce the $7.2 billion they will get.
The dispute was characteristic of a reorganization that has been both lengthy and highly contentious.
CEOC filed for Chapter 11 protection in January 2015 in the midst of complaints by junior lenders that Apollo, TPG and Caesars Entertainment had stripped the company of its most profitable gaming assets and shuffled them into separate companies to shield them from creditor claims. It took months of negotiations and an additional infusion of cash by Caesars to satisfy them by boosting their estimated recovery to 65.5 percent from about 39 percent.
Hearings on a final approval of the reorganization are scheduled to begin January 17 before U.S. Bankruptcy Judge A. Benjamin Goldgar.
