An attorney for a bankrupt division of Caesars Entertainment Corp. told the Gaming Control Board on Wednesday that the casino operator was “looking seriously” at the issue surrounding retired company employees who lost their pension checks because of the Chapter 11 filing.
During a discussion about the bankruptcy of Caesars Entertainment Operating Co., Control Board member Terry Johnson asked Caesars attorney Steven Pesner about former employees who were told in January the company would no longer make payments under a Supplemental Employee Retirement Plan.
“The issue will be addressed in a manner that is legal, fair and equitable by the company,” said Pesner, who is from New York City and is a partner with Akin Gump Strauss Hauer &Feld. “There are equitable considerations to be made. This is being looked at seriously.”
The Las Vegas Review-Journal reported Tuesday an undisclosed number of retired Caesars employees were told through a form letter Jan. 15 that under the bankruptcy code, SERP payments “are considered a general unsecured pre-petition obligation of the debtor and cannot be paid without specific authorization from the bankruptcy court.”
Several retired employees told the newspaper their checks stopped coming in January.
The retirement plans were offered by businesses that were subsequently acquired by Harrah’s Entertainment in the company’s 2005 buyout of Caesars Entertainment for $9 billion.
A Caesars official said “fewer than 50 people” were under the plans affected by the bankruptcy. However, legal sources said the number was more than double when multiple plans are considered.
Pesner told the Control Board the company would address the matter. After the hearing, Pesner said he was still trying to gather all the facts surrounding the issue.
“If I were in charge of the world, people would come before banks,” Pesner told the Control Board. “We have plenty of people looking at this.”
Johnson told Caesars representatives gaming regulators want to be kept apprised on how the SERP issue plays out.
“The pensioners are an important matter that should not get lost in this discussion,” Johnson said.
After the hearing, Johnson said he was concerned about the message the Caesars bankruptcy sends if retired employees lose pension checks.
“The intent of the board was to make it it known this is an issue we are concerned about.” Johnson said. “I still don’t know if they have talked with the bankruptcy judge about this issue.”
The bankruptcy discussion came at the outset of the Control Board hearing, which had four items on the agenda surrounding CEOC, including the licensing of CEO John Payne and chief financial officer Mary Beth Higgins. Those items took less than 20 minutes to conclude. The bankruptcy discussion lasted nearly an hour.
CEOC, the company’s largest operating division, filed a prepackaged Chapter 11 bankruptcy plan in Chicago that is expected to eliminate $10 billion of $18.4 billion of the debt on the company’s books.
Caesars is seeking court approval to covert the unit into a publicly traded real estate investment trust. CEOC controls Caesars Palace, Caesars Atlantic City, Harrah’s Reno and more than a dozen regional properties.
Pesner and Caesars Entertainment Chief Financial Officer Eric Hession spelled out the steps the company has taken in the bankruptcy process. Pesner said the restructuring could be concluded by the end of the year if the plan moves forward.
“This is the largest and most complex bankruptcy in a generation,” Pesner said.
He told the regulators the company joined with the creditors in asking for an examiner to review the financial findings of the plan. He said the judge had not yet ruled on the examiner.
Caesars, which has a gaming industry-high of $22.8 billion in long-term debt, has said the reorganization would make the company more manageable, allowing the casino operator to better run the business.
Hession said if the bankruptcy plan in its current state is adopted, all of the Caesars entities would be cash-flow positive.
“In reality, that’s opposite of where we are today,” Hession said.
Payne and Higgins were recommended for licensing by the Control Board, but Chairman A.G. Burnett was somewhat critical that Payne lives in New Orleans, though he spends time in Las Vegas.
Payne, a Caesars employee for 20 years, once headed the company’s Central Division and was general manager of several properties, including Harrah’s New Orleans.
Burnett mentioned that retiring Caesars CEO Gary Loveman is a Massachusetts resident.
“That hasn’t worked out too well,” Burnett said.
Contact reporter Howard Stutz at email@example.com or 702-477-3871. Find him on Twitter: @howardstutz