Caesars debt saga reaches denouement

Caesars debt saga reaches denouement

Tuesday, October 11, 2016 Posted by Andy McCarron
A deal is reached with debt-holders

A saga to rival Moby Dick appear to be finally entering the epilogue stage after casino giant Caesars Entertainment Corporation (CEC) reached an agreement with all its bondholders, including its recalcitrant second-lien lenders, over restructuring plans for its subsidiary Caesars Entertainment Operating Company (CEOC).

The deal was reached at the end of September and in a statement issued last week the company confirmed it had entered into Restructuring Support Agreements (RSAs) will all its major creditor groups.

The agreement means the private equity owners of Caesars, Apollo Global and TPG, will surrender their interest in the publicly-traded CEC, worth approximately $1bn, in return for the release from liability claims that could have totalled up to $5bn.

The deal came after many months of arguments in the bankruptcy court in Chicago where Apollo and TPG were criticised by judge Benjamin Goldgar over the terms of the original deal that was put on the table. The initial offer for the second-lien bondholders would have seen them receive 9 cents for every dollar of debt owed. This new agreement, in contrast, will see them receive 66 cents on the dollar.

The bankruptcy process began in January, though a subsequent report from the court examiner found the company had almost certainly been insolvent from the last quarter of 2013 onwards.

The second-lien bondholders claimed Caesars’ owners had improperly shifted assets out form the operating unit CEOC to CEC before putting the first into bankruptcy.

The creditors will own 70% of Caesars once the agreement reaches completion next year while Apollo and TPG will own a small stake in the firm of circa 16%. They originally bought Caesars in 2008, just ahead of the credit crisis, for $30bn. Other shareholders in Caesars will also see the value of their stakes drop, to around 6% from about a third previously.

To be completed, the agreement will go before judge Goldgar in January after which the company would emerge with a new debt structure and new owners.

Totally Gaming says: The Caesars debt story truly was a blockbuster. The original black swan of the banking crisis may not have been foreseen by those involved in the deal, but the size of the debt mountain was always going to be an issue, credit crisis or no credit crisis. That the company has survived at all is something of a miracle, and Caesars can now move forward, albeit under new ownership and with a more manageable debt structure behind it.

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