With the clock ticking on Caesars Entertainment’s ability to steer the reorganization in U.S. Bankruptcy Court of its largest casino operating unit, the company has changed the terms of its planned merger with its Caesars Acquisition unit in hopes of enlisting the support of junior creditors for the reorganization plan.
Caesars Entertainment Operating Co. received approval last month from a U.S. Bankruptcy judge to begin seeking votes from creditors on a plan to restructure $18 billion of debt and exit the reorganization as a new operating company and a real estate investment trust.
The plan would slash $10 billion of debt from CEOC with parent Caesars Entertainment contributing billions of dollars of cash and equity to help repay CEOC’s creditors.
Some of that cash will be generated by merging Caesars Entertainment with Caesars Acquisition. The merger was originally proposed in December 2014 and as amended will provide for Caesars Acquisition shareholders to receive 27 percent of the merged entity as opposed to the 38 percent originally proposed.
Among other assets, Caesars Acquisition owns Planet Hollywood and the Linq Hotel in Las Vegas and Harrah’s New Orleans, which were acquired from CEOC before it filed for bankruptcy protection in January 2015. CEOC’s junior creditors, led by Appaloosa Management, say those deals stripped billions of dollars of the best assets from the operating unit, leaving it too deeply indebted to survive without a restructuring. The junior creditors remain the biggest hold-outs in the reorganization and have said they have as much as $12 billion in claims against Caesars Entertainment and its private equity backers, Apollo Global Management and TPG Capital.
Either way, time is of the essence because a temporary hold on lawsuits against Caesars Entertainment by junior bondholders expires in August.
Caesars Entertainment has said that any court rulings in favor of those claims could threaten its contribution to the reorganization plan and plunge it into bankruptcy alongside CEOC.
