Two years after Caesars Entertainment Operating Co. entered the protection of Chapter 11 of the U.S. Bankruptcy Code with billion in debt the casino giant is poised for a new life, completely restructured and with its debt load slashed by more than half.
Bankruptcy Judge Benjamin Goldgar gave his approval to a complex reorganization plan that has taken months of painstaking negotiations and deal making between parent Caesars Entertainment and CEOC’s numerous creditors to achieve.
A “major milestone” is how Caesars CEO Mark Frissora described it. “The new Caesars will be a stronger company,” he said in a statement issued shortly after Goldgar’s ruling.
“It is a monumental achievement,” the judge said. “Certainly for the creditors, it’s a magnificent recovery.”
The plan, which in essence gives lenders majority control of a company split in two between a real estate investment trust and a casino and hotel operator, also calls for creation of a third entity to take possession of Caesars Palace Las Vegas and hinges as well on Caesars Entertainment completing a merger with a separate, healthy subsidiary, Caesars Acquisition.
State regulators also must sign off on the deal.
“While there is still much work ahead to complete this process, we are excited about the future of the Caesars enterprise,” Frissora said.
Backing the plan is a $5 billion contribution from Caesars Entertainment and its private-equity sponsors, Apollo Global Management and TPG Capital, in the form of cash and promises to underwrite billions of dollars of the newly created REIT’s debt. In exchange, creditors will drop lawsuits over Caesars’ 2014 decision to disavow guarantees on certain CEOC notes, which junior bondholders saw as an attempt to minimize their recovery to the benefit of Apollo and TPG.
Creditors will also be prohibited from pursuing legal claims related to pre-bankruptcy asset transfers that shifted several of Caesars’ healthiest and best-performing properties out of CEOC and their reach. It was one of the most contentious elements of the negotiations. An independent examiner in March 2016 said claims arising from the transfers could cost Caesars between $3.6 billion and $5.1 billion in constructive and actual fraud claims.
Caesars Entertainment operates 50 casinos in five countries and 13 U.S. states, most under the Caesars, Harrah’s and Horseshoe brands. It employs more than 60,000 people.
CEOC, which encompassed more than half those properties, entered Bankruptcy Court protection in January 2015 after it failed to make a scheduled interest payment on its then-massive debt load, most of which stemmed from Apollo’s and TPG’s ill-timed $30 billion takeover of Caesars Entertainment on the eve of the Great Recession in 2008. The Chapter 11 filing came days after junior creditors attempted to force the company’s hand by filing an involuntary bankruptcy petition.
