Caesars makes last-ditch offer to bondholders

Caesars makes last-ditch offer to bondholders

Monday, September 26, 2016 Posted by Andy McCarron
A $1.6bn sweetener offer proffered to solve bankruptcy fears

Negotiations are apparently ongoing over the take-it-or-leave it offer from Caesars Entertainment Corporation (CEC) to pump a further $1.6bn contribution to help toward the reorganisation of the company’s bankrupt operating company.

The casino giant said last week that alongside its owners Apollo Global Management and TPG Capital that it was proposing to enhance its own contributions to the restructuring plan it had put forward.

The company said the proposed increase that would be handed over to the second-lien noteholders comprised almost $1bn in Caesars Entertainment equity, a cash contribution of over $100m and a reduction in the cash that will be recovered by first-lien bondholders. Caesars said the reduction in cash due to the first-lien bondholders would run to the “hundreds of millions of dollars”.

The company added in a statement: “These additional contributions, which will enhance the recovery to the second lien noteholders and unsecured creditors, have been proposed by Caesars Entertainment and the sponsors who are engaged in negotiations with the first lien bondholders and bank lenders on these points.”

Bondholders had until midnight New York time on Friday to accept the offer, but it is thought that negotiations went on into the weekend. The company said in a statement to Bloomberg News that it believed the proposal “meets the requirements of the holders of CEOC’s second-lien notes and is optimistic that such proposal will be acceptable.”

US bankruptcy judge Benjamin Goldgar had previously suggested that Caesars would have to contribute the amount suggested in order to placate the second-lien bondholders. The case is being held in Chicago.

The move is the latest twist in the Caesars bankruptcy story. The operating unit Caesars Entertainment Operating Corporation (CEOC) originally filed for bankruptcy in January 2015. However, second-lien bondholders sued the company in the wake of the bankruptcy alleging that CEC’s owners had asset stripped the operating company ahead of the separation of CEC from CEOC leaving the latter unable to fulfil the obligations due from its $18bn debt load.

A report from an independent examiner earlier this year was coruscating, and found that Apollo and TPG could be liable to damages amount to $5bn due to their mishandling of the bankruptcy.

In late August, Goldgar cleared the way for a lawsuit brought by bondholders to be held in New York which had the potential to see CEC follow CEOC into bankruptcy. However, a last-minute stay was ordered.

Should the bondholders refuse the new offer, it is likely that they will get their day in court in New York in October.

Totally Gaming says: Grudgingly, it would appear that Caesars Entertainment and its sponsors Apollo and TPG have stumped up an amount that might mean that it will be spared the ignominy of a court date in New York that would almost certainly lead to its being forced into bankruptcy alongside the operating vehicle. Fingers crossed the two sides can reach an agreement.

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