There was good news and bad news for Caesars Entertainment last week in its continuing struggle to restructure an industry-high debt load and enter a prepackaged bankruptcy as early as this week.
Caesars announced that its largest unit, Caesars Entertainment Operating Company, Inc. (CEOC) reached its goal of sealing an agreement with senior bondholders on its restructuring plan. The operator says more than 60 percent of first-lien bondholders have signed the Amended and Restated Restructuring Support and Forbearance Agreement, dated as of December 31, 2014 As a result, the RSA became effective pursuant to its terms as of January 9.
The consenting creditors will hold more than 67 percent of the bonds subject to the agreement, which will hasten the operator’s prepackaged bankruptcy.
“We are pleased to have the support of our first-lien noteholders on CEOC’s restructuring plan, said Caesars Chairman and CEO Gary Loveman. “This is an important step in the process that will allow us to move ahead with our plan to create a strong and sustainable capital structure for CEOC.”
Meanwhile, Caesars officials were stymied last week in their attempt to have claims by junior bondholders dismissed prior to the bankruptcy. Those claims will now go to arbitration.
The main issue in this case is credit-default swaps against $26.9 billion in debt, which the creditors claim were illegal maneuvers to avoid paying interest on their bonds.
Caesars skipped a $225 million interest payment that was due December 15 on some of its junior bonds, and hoped to have the case dismissed prior to its bankruptcy.
To dismiss the junior bondholder claims, 12 members of a 15-firm committee of bonds traders under the International Swaps and Derivatives Association (ISDA) would have had to side with Caesars. Only 10 voted to dismiss the claims, which sends the claims to an arbitration panel of three independent third-party professionals. The panel may consist of academics or legal experts in the derivatives market. Its decision will be binding on all participants.
The bondholders requested that ISDA hold Caesars responsible for both principal and interest payments on the debt. The outstanding swaps tied to Caesars would result in a maximum payout of $1.7 billion to buyers of derivatives, protecting against a default by the company after overlapping trades are accounted for.
