For two years, the junior creditors of Caesars Entertainment have stubbornly refused to be pushed to the end of the payment line, responding with lawsuits and pressure. Last week, after a sweetened offer by Caesars, they fell in line. The deal would pay out billion in cash, along new equity and bonds. The question that remains now is will the senior creditors forgo some of the gains they made early on in negotiations to finalize a deal.
Bloomberg was reporting that some of the of those senior debtors were hesitating, including Apollo Global Management LLC and TPG Capital, the companies that bought Caesars in 2008 in a leveraged buyout.
Under the deal, the junior creditors, led by David Tepper’s Appaloosa Management, would have to drop any legal actions and accusations that contend that Apollo and TPG plundered the company’s valuable resources by spinning off various subsidiaries during their tenure. They also complain that Caesars failed to deliver on a promise to repay the debt.
Caesars, Apollo and TPG deny the allegations and contend that the spin offs were a legitimate effort to restructure the company into profitability.
The reorganization plan remains the same. Two companies would emerge from bankruptcy—one would own the Caesars properties and collect rent, while the other would operate the properties and collect revenue, in a REIT format now familiar in the gaming industry.
Caesars’ bankruptcy judge, A. Benjamin Goldgar, is being given credit for the agreement by Bloomberg. Goldgar has been increasing hostile to Caesars, accusing the company of getting a “free ride” from lawsuits. His indication that he’d let the lawsuits proceed is seen as the catalyst to this deal.
