Caesars Entertainment, on the heels of the bankruptcy filing of its largest unit, announced that Gary Loveman, who has been the operator’s CEO for 12 years, will step down from that position effective July 1. He will be replaced by Mark Frissora, the former CEO of Hertz Global Holdings.
Loveman will remain chairman of the board of Caesars Entertainment and Caesars Entertainment Operating Company (CEOC), the unit that filed for Chapter 11 bankruptcy protection last month. Frissora, who spent seven years as CEO of Hertz before stepping down last September amid flat results and accounting questions, will become a director of Caesars immediately, and will work with Loveman as CEO designee during the transition period.
Loveman will continue to oversee the prepackaged restructuring of CEOC, which recently won its battle to have its case heard by a Chicago bankruptcy judge. The operator has requested that the judge nullify an involuntary bankruptcy petition filed in Delaware by second-lien creditors. Caesars’ restructuring plan, if approved by the court, will eliminate $10 billion of CEOC’s $18 billion in debt, the major portion of Caesars Entertainment’s industry-high $25 billion in debt.
Loveman, a former Harvard Business School professor, joined Caesars as chief operating officer in 1998, becoming CEO in 2003. He is one of the industry’s longest-tenured CEOs and highest-paid executives. He oversaw Caesars’ acquisition of Horseshoe Gaming and its World Series of Poker in 2004, and its acquisition of Caesars Entertainment a year later.
Just before the national recession deepened in 2008, Loveman took Caesars private through a $30.7 billion acquisition by hedge funds Apollo Global Management and TPG Capital. It was this transaction that led to the operator’s problems, leaving Caesars at the time with $22.8 billion in debt.
The operator has struggled with flat results and ballooning debt since then. For the last four months of 2014, Caesars negotiated with senior creditors to restructure CEOC’s debt and formulate a prepackaged bankruptcy, which it filed in Chicago on January 15. Junior creditors filed the involuntary bankruptcy petition three days later.
Those same junior creditors are plaintiffs in one of two lawsuits against Caesars, claiming that transactions performed by Caesars to transfer assets such as the Planet Hollywood resort on the Las Vegas Strip to a real-estate investment trust were illegal, and that the restructuring leaves them holding the bag for around $5 billion in debt.
Those lawsuits become null and void should Chicago U.S. Bankruptcy Judge A. Benjamin Goldjar approve CEOC’s prepackaged bankruptcy. Last week, Goldjar was assembling a panel of creditors that will form a committee to represent those low-level creditors, as well as unsecured creditors such as suppliers and pensioners.
Caesars told the court it will support an independent examiner to review the asset transfers as part of the bankruptcy case.
In a statement, Loveman said the prepackaged restructuring marks a good time to step down from his CEO duties. “My decision to begin to transition management now comes with the confidence that we have taken the steps necessary to ensure the company’s long-term success,” he said. “I am proud of the company’s many accomplishments and grateful for the loyalty and friendship of my thousands of colleagues.”
Frissora, 59, agreed in a statement of his own that he is joining Caesars at a crucial time in the company’s history. “Caesars’ network and range of offerings and amenities make it a true leader in gaming, entertainment and hospitality,” Frissora said. “I am looking forward to working closely with Gary, the board and the leadership team to ensure a smooth transition.”
Apollo founder Marc Rowan and TPG founder David Bonderman issued a joint statement recognizing Loveman for his “vision and passion” in building Caesars Entertainment into a world-class operator. “We respect Gary’s desire to begin transitioning the management of the company at this time,” the statement said.
Rowan and Bonderman also praised Frissora’s accomplishments at Hertz, a company he built from a single brand into a global organization with four retail brands. Prior to Hertz, he was chairman and CEO of auto parts supplier Tenneco. “Mark has a long history of driving growth, optimizing operations and creating shareholder value,” Bonderman and Rowan said. “We are confident that his efforts combined with the restructuring…will help create long-term shareholder value at Caesars.”
Should Caesars’ restructuring plan be approved, CEOC will be split into two entities—a real-estate investment trust that will own all of its properties and an operating company that will lease and manage them. Several major properties, including the flagship properties Caesars Palace in Las Vegas and Harrah’s Atlantic City, are not part of CEOC, and will remain in separate Caesars Entertainment divisions.
Sources also tell GGB News that Caesars is searching for a operational head, and that former Sands China President Ed Tracy is a leading candidate.
Meanwhile, Caesars has hired an anti-money laundering expert as a senior vice president as the company seeks to comply with an investigation by the U.S. Treasury and a federal grand jury over alleged failures to comply with anti-money laundering (AML) laws.
Caesars hired Benjamin Floyd, who was the top AML expert working for Wal-Mart Stores Inc., as senior vice president in charge of AML compliance.
“Ben will be dedicated solely to focusing on our AML efforts going forward,” Caesars spokesman Gary Thompson said in a statement to Reuters. “We are very confident his AML experience with Wal-Mart qualifies him for his new role with us.”
