Caesars Entertainment, struggling to refinance a suffocating billion debt load, has reached an agreement with the trustee of the first-lien bonds whose holders could upset the operator’s refinancing efforts.
Caesars reached a waiver agreement with UMB Financial Corporation, the trustee of almost $5 billion in first-lien bonds, to keep the holders of those bonds engaged in negotiations that will delay a potential notice of default. Under the agreement, any default notice filed on or after September 19 would accelerate the time Caesars has to comply with its credit pact—it would have to address creditor claims within 10 days, rather than the normal 60-day period.
The deal is meant to give the operator more time to negotiate with that particular group of bondholders to restructure the notes before declaring them in default. Caesars already has received a notice of default from a group of second-lien bondholders, who have sued Caesars for pressing restructuring while selling assets to its real estate investment trust, which they say will leave them with no guarantee of repayment on some $1 billion of debt. Caesars counter-sued, alleging the bondholder group is deliberately sabotaging its refinancing efforts.
The company also cut a deal with a group of unsecured bondholders who hold second-lien notes on Caesars’ largest operating unit. Those bondholders will be repaid a portion of their holdings at close to par in exchange for agreeing to restructure the notes within six months.
Some of the operator’s most junior bondholders who own th4 same securities objected to the deal, sending the operator a letter protesting the transaction. O’Brien LLP, a law firm representing those bondholders, said the new transaction would “result in violations of our clients’ rights under their agreements with the company and under the law,” by offering some bondholder preferential treatment over others holding the same notes.
“We are going to argue that this transaction improperly provides special treatment to a select group of holders,” firm principal Sean O’Brien told Bloomberg.
Meanwhile, Caesars’ latest move to restructure its company is an attempt to spin off its national customer loyalty program, Total Rewards, into a separate entity. A request is currently before regulators in eight separate jurisdictions to approve the move, which apparently is meant to protect the asset and its valuable customer lists from creditors in the event of a bankruptcy.
The latest move is being fought by another group of Caesars bondholders, headed by hedge fund mogul David Tepper. Tepper’s Appaloosa and other unsecured creditors have filed suit in Delaware to stop the Total Rewards split. The group is telling New Jersey authorities that the move is a ploy to protect customer lists so Caesars can enter bankruptcy status for its Atlantic City casinos Bally’s and Caesars. The operator is slated to close its other Boardwalk casino, Showboat, at the end of the month.
