Caesars Entertainment’s bankrupt larges operating unit, Caesars Entertainment Operating Company (CEOC), has filed an amended reorganization plan with U.S. Bankruptcy Judge A. Benjamin Goldgar.
The new restructuring plan was formulated after extended negotiations with second-lien bondholders to garner the support of more of its creditors. For the plan to be accepted and the company to emerge from Chapter 11 bankruptcy, at least half of the lower-level bondholders need to approve of the restructuring, which was negotiated with senior noteholders late last year to slash around $10 billion in debt from the unit’s record $18 billion owed.
The new plan boosts the amount of money creditors who have supported it will recover from the restructured operator. Like its predecessor, it would split CEOC into two entities—a real-estate investment trust that would own the real estate and an operating company that would lease the and manage the properties.
According to a Bloomberg report, under the revised plan, senior bank lenders owed about $5.35 billion could share in nearly $3.2 billion in cash as well as new debt. Senior bondholders owed more than $6.3 billion could share in $1.45 billion in cash as well as new debt and new equity in the restructured companies.
The new plan would give junior creditors, including second-lien bondholders owed $5.2 billion, 17.5 percent of the equity in the REIT, though those shares would be increased should they vote for the plan. A yes vote would also get them $450 million of convertible notes issued by Caesars Entertainment, the non-bankrupt parent company.
A yes vote would produce an estimated recovery of 18 percent of the junior creditors’ claims, as opposed to around 5 percent without the new restructuring.
Caesars Entertainment is attempting to restructure its debt in a way that avoids the parent itself entering bankruptcy. In conjunction the new plan, the operator has asked for an extension of the deadline for submission of the final restructuring plan, from November 15 to March 15, 2016.
Meanwhile, Caesars was dealt a setback in another court setting, when U.S. District Court Judge Robert Gettleman ruled that the creditor lawsuits against the company—many filed by the same lower-level creditors the operator is trying to bring on board with the restructuring—may proceed while the main operating unit is in bankruptcy proceedings.
This is bad news for Caesars, as the lawsuits challenge transactions made by Caesars Entertainment to move assets around between divisions to place them out of reach of creditors—moves critical to the main restructuring plan hammered out with first-lien creditors.
The lawsuits were filed in New York and Delaware. Should they prevail, parent Caesars Entertainment could be forced into bankruptcy along with its largest operating unit.
