Interest expenses increase operator’s quarterly loss
Caesars Entertainment Corporation, which is struggling to refinance some $24 billion in debt to stave off bankruptcy, has cut a deal with senior bondholders to rebuy notes to cut the operator’s indebtedness by $548.4 million.
According to a regulatory filing, bondholders agreed to sell Caesars $89.4 million of its 6.5 percent notes due in 2016 and $66 million of its 5.75 percent debt due 2017. Caesars and its operating unit will each pay holders $77.7 million in cash, while the parent contributes “no less than” $393 million of notes to its operating unit to be canceled.
According to a Bloomberg report, the company also won the support of the holders of $82.4 million of notes to amend indentures and agree to a restructuring of the notes within six months, and to modify provisions that restricted sales of the operator’s assets to a subsidiary that would prevent their seizure by creditors.
“This is just another step that the company is taking toward a bigger restructuring,” Chris Snow, an analyst at debt-research firm CreditSights Inc. in New York, told Bloomberg.
“The transaction we are announcing today is the latest in a series of steps intended to deleverage” the operating unit and “position it for a potential stock listing,” Caesars CEO Gary Loveman said in a statement.
Caesars completed the transaction despite an ongoing legal battle with a group of second-lien bondholders. The noteholders sued the operator earlier this month, accusing it of fraudulently transferring assets as part of the restructuring and wasting assets. The operator counter-sued, accusing the bondholders of purposely impeding progress on restructuring the operator’s debt.
Meanwhile, the restructuring did not prevent continued losses due to the interest expense required to finance the massive debt. The operator reported that its second-quarter loss more than doubled, in part because of higher interest expenses.
Caesars reported a net loss of $466.4 million, or $3.24 per share for the quarter, compared to $212.2 million or $1.69 a share a year ago. The company blamed interest cost that rose to $113.7 million for the quarter, and what it called a “difficult operating environment” in Atlantic City, where the company announced it will close its Showboat casino-hotel at the end of the month.
Caesars stock fell 2.3 percent to $13.35 after it announced the quarterly results. The stock has fallen 37 percent this year.
