Report: Caesars shopping interactive division
Caesars Entertainment Corp. is more than doubling down on its offer to disgruntled lower-level creditors with the restructuring plan for its bankrupt largest unit, Caesars Entertainment Operating Company (CEOC).
Last week, Caesars filed an updated reorganization plan to U.S. Bankruptcy Judge A. Benjamin Goldgar, proposing a package that would return around $4 billion to lower-level creditors whose lawsuits against the company claim their $5.1 billion in debt was essentially a casualty of the plan Caesars hammered out with first-lien bondholders in late 2014.
Caesars officials have spent much of the past year negotiating with those second-tier bondholders, trying to get at least half of them to accept the original restructuring plan. The company’s original offer of $1.5 billion in cash, stock and debt was rejected, as Goldgar ruled that several lawsuits from many of the same creditors may proceed while the bankruptcy case progressed.
Caesars’ updated restructuring plan offers the creditors a package worth about $4 billion. Perhaps not coincidentally, the filing followed reports in that Caesars is shopping its interactive division, Caesars Interactive Entertainment, and has already received bids of $4 billion or more.
Under the new proposal, Caesars would transfer up to 47.5 percent of stock in a reorganized company to creditors and contribute $406 million in cash, $1 billion in convertible notes and a discount on rights to buy $500 million worth of stock.
To collect, the second-tier creditors of CEOC would have to drop lawsuits against the parent company.
Caesars said in its filing that the new plan avoids “the risks of potentially value-destructive litigation,” letting CEOC exit bankruptcy by “securing substantial contributions from CEC and its affiliates to support significant near-term recoveries.”
The five creditor lawsuits, filed in Delaware and New York, allege that Caesars Entertainment moved valuable assets from CEOC prior to the bankruptcy to protect them from creditors, transfers they claim are illegal. One lawsuit also seeks recognition of a forced bankruptcy petition against the parent company, filed a few days after the CEOC bankruptcy.
An independent court-appointed examiner has agreed that the asset transfers were probably illegal, and also concluded that lower-level creditors could get as much as $5.1 billion through lawsuits.
Creditors have a right to vote on the new plan before it goes to Goldgar for approval. According to a report in Bloomberg, that process could take several months.
It remains to be seen whether the lower-level bondholders will accept the $4 billion, a figure which may or may not have been based on the reaction of a potential sale of Caesars’ lucrative interactive division. The Wall Street Journal reported last week that Caesars Interactive Entertainment (CIE), the company’s online division, is considering selling Playtika, its Israel-based social gaming subsidiary.
CIE reportedly has hired investment bank Raine Group LLC to evaluate unsolicited bids for Playtika, some of which have exceeded $4 billion, according to unnamed sources in the WSJ article. The newspaper quoted CIE CEO Mitch Garber as saying that no while no formal sale process is under way, “we want to hear what people have to say, for sure.”
Caesars acquired Playtika and its fast-growing mobile-and-social-games business for $100 million in 2011 from Israeli founders Robert Antokol (still the CEO) and Uri Shahak. The company is one of the world’s leading suppliers of social and mobile games, with $725 million in revenue last year.
Caesars returned $89.3 million in EBITDA for its online business—which is mainly Playtika—in the first quarter of 2016, with the division returning a 40 percent profit margin, and $350 million in annualized EBITDA, WSJ reported.
CIE owns the World Series of Poker brand, which was transferred to the interactive division when CIE was formed in 2009, taking the famous annual tournament name online with WSOP.com. It was not immediately clear whether the famous annual live tournament would be part of any sale of CIE.
