Investors weigh impact of report
Caesars Entertainment Corporation has formally responded to the report of independent examiner Richard Davis, in the bankruptcy case of its largest operating unit, Caesars Entertainment Operating Company (CEOC).
Davis’ report called moves by Caesars and its private-equity owners, Apollo Global Management and TPG Capital, to transfer valuable properties out of CEOC prior to the bankruptcy “fraudulent” moves to shield more than $5 billion in debt from creditors.
Caesars defended the moves in its response, saying, “We believe the evidence shows that each of the challenged transactions was undertaken to strengthen CEOC and provide it with the liquidity and resources required to sustain it and give it time to recover from unprecedented market challenges.
“These transactions provided immense and indisputable benefit to CEOC and its creditors, who received billions of dollars in principal and interest payments. This is ultimately a dispute about valuation, process and whether CEOC was solvent at the time of each of the transactions. We disagree with the examiner’s subjective conclusions and opinions on these financial issues.”
Caesars went on to write that the transactions were done after consults with advisers from highly regarded investment banks, and “the most significant transactions were negotiated and overseen by committees of independent directors of Caesars Entertainment and its affiliates.”
Caesars concluded its response by pledging to “contribute substantial and appropriate value to creditors” in a settlement to be negotiated ad part of the plan for reorganization already on file. “The current plan keeps the Caesars family of companies linked together and maximizes value for all stakeholders, which will help provide the greatest financial outcomes for all parties,” the operator wrote. “We hope the issuance of the report will facilitate ongoing settlement discussions and lead quickly to a consensual resolution of the Chapter 11 proceedings of CEOC.”
Meanwhile, Caesars investors were assessing the impact of the examiner report, which could put Caesars Entertainment itself in Chapter 11 bankruptcy should its original restructuring plan, negotiated with first-lien bondholders, come unraveled.
“The report’s scope was much broader than expected, and it was much more creditor-friendly than expected,” said Fitch Ratings analyst Alex Bumazhny in an interview with Reuters. The report puts the lower-level creditors in a much better negotiating position, added bankruptcy attorney James Newell, who told Reuters, “The report clearly provides a level of leverage that bondholders didn’t have before.”
