First-lien noteholders could impose their own restructuring
The backbone of the restructuring plan hammered out last year between Caesars Entertainment and first-lien noteholders of its largest operating unit is in jeopardy.
Frustrated with the progress of the plan for restructuring of the Caesars Entertainment Operating Company (CEOC) unit, senior noteholders filed a statement with the U.S. Bankruptcy Court last week saying they retain the right to tear up the agreement made last year and impose one of their own.
CEOC filed for bankruptcy in January 2015, citing $18 billion in debt. That filing has been the subject of much dispute, including lawsuits from lower-level bondholders claiming Caesars and the top lenders left them out of the deal, which would slash $10 billion in debt from the unit with top lenders recouping most of their investments.
The lawsuits claim that Caesars set CEOC up for the bankruptcy by illegally transferring assets out of the unit and into a protected real estate investment trust. The restructuring plan before U.S. Bankruptcy Judge A. Benjamin Goldgar in Chicago is under scrutiny from court-appointed investigators, and the results of that investigation could sink the restructuring plan in itself.
The senior-level creditors party to that restructuring are getting impatient, and are reserving the right to file their own plan. In the court filing, they noted “a very substantial decline in the value of the debt and equity securities proposed to be provided” to them under the restructuring, lowering the amount of their investment to be recovered. “If sufficient progress toward a consensual plan is not made… it may very well be that a plan proposed by the first lien bank and noteholders becomes the most efficient means to allow (the company) to emerge in a timely manner from bankruptcy.”
Caesars officials declined comment to Reuters, which broke the story.
Meanwhile, the Bankruptcy Court in Chicago hearing the Caesars case agreed to another extension on the deadline to file the official plan to emerge from bankruptcy. Caesars will now have until July 15—moved from March 15—to file the plan. But this means the case has taken the maximum amount of time to set up a restructuring, and another extension is not possible. In addition, Caesars must get all interested parties on board by September 15.
