The major creditors of Caesars Entertainment’s largest operating company have agreed to a settlement that paves the way for the heavily indebted division to emerge from federal bankruptcy protection.
Days after Caesars reported that talks with the senior lenders had stalled, the parent company announced last week that bank and first-lien bondholders owed around $12 billion of Caesars Entertainment Operating Co.’s debt are now behind a restructuring of CEOC as a casino management company whose sizable property assets will be spun off into a real estate investment trust.
Caesars says the new structure will erase $10 billion of CEOC’s industry-high $18.4 billion of debt and allow it to focus on negotiating an agreement with second-lien bondholders that it can bring to the federal judge overseeing the reorganization by November.
After missing an interest payment due last December, CEOC entered Chapter 11 protection in January amid a flurry of lawsuits from junior creditors challenging a series of earlier moves by Caesars’ private equity owners that they say stripped CEOC of the company’s most profitable gaming assets to shelter them from an eventual disposition in U.S. Bankruptcy Court.
CEOC operates Caesars Palace in Las Vegas, Caesars Atlantic City and a dozen or so regional casinos.
Caesars is majority owned by private equity firms Apollo Global Management and TPG Capital, who originally took the company private in a $31 billion leveraged buyout completed just as the Great Recession hit in 2008, battering casino revenues in Las Vegas and nationwide and saddling Caesars with debt service that would prove untenable.
Caesars also announced last week that the company has agreed to pay $20 million to settle money laundering charges leveled against it by the U.S. Justice Department and the Treasury Department’s Financial Crimes Enforcement Network.
The penalty will satisfy both the Justice Department’s criminal charges and civil allegations by FinCEN, reports say.
The Nevada Gaming Control Board also is a party to the deal.
In October 2013, Caesars disclosed it was under investigation by FinCEN and the Justice Department over alleged failures to comply with the Bank Secrecy Act, the primary U.S. anti-money laundering law. The charges include allegations that the company’s flagship, Caesars Palace, failed to properly police its sports book for wagers placed by illegal betting rings, according to a source cited in news reports.
There was no immediate comment last week from Caesars Entertainment, the Justice Department or FinCEN, the reports said. A spokesman for the Nevada Gaming Control Board declined to comment.
The settlement comes as U.S. authorities press financial institutions to step up their compliance with the Bank Secrecy Act. The casino industry has been one of the sectors singled out for special attention. In 2013, Las Vegas Sands agreed to pay $47 million to the Justice Department to avoid prosecution for money laundering violations. Earlier this year, Trump Taj Mahal Casino Resort in Atlantic City settled with FinCEN for $10 million in a money-laundering investigation.
