Caesars’ main unit to file for bankruptcy in January
Caesars Entertainment Operating Co., the main operating unit of Las Vegas-based Caesars Entertainment Corp , said Friday it would file for Chapter 11 bankruptcy protection by mid-January to cut its burgeoning debt.
December 19, 2014 - 3:14 pm
The main operating unit of Caesars Entertainment Corp. said Friday that it plans to file for Chapter 11 bankruptcy protection in January to slash its debt by more than half.
The proposed transactions will reduce Caesars Entertainment Operating Co.’s debt to $8.6 billion from about $18.4 billion, executives said.
“The planned restructuring of CEOC will allow us to establish a strong and sustainable capital structure for CEOC and maximize value for our stakeholders,” Chairman Gary Loveman said in a statement. “I want to thank this creditor group for its support of the restructuring. We believe the financial restructuring plan we are announcing today is in the best interests of all of CEOC’s stakeholders. We look forward to continuing to welcome guests across our network throughout this process.”
Loveman added that business operations at all of its properties, as well as its Total Rewards program, will “continue as usual throughout the balance-sheet restructuring process.”
Other units, including Caesars Entertainment, Caesars Entertainment Resort Properties and Caesars Growth Partners, will not be part of the court-supervised process.
In its Friday announcement, Caesars Entertainment Operating Co. said it would split its U.S.-based assets into two companies — an operating entity and a publicly traded real estate investment trust — that will own a newly formed property company.
These steps will slash its annual interest expense by 75 percent to about $450 million, it said. Caesars Entertainment will contribute up to $1.45 billion in cash to the operating company for the restructuring.
Loveman said “the highly efficient REIT structure” would allow the company to “maximize its value and provide the most financial recovery to each of CEOC’s creditor groups.”
“The formation of a publicly traded REIT would also allow CEOC to significantly reduce its leverage by creating two better-capitalized companies with vastly improved cash flow generation,” he said.
Caesars, the nation’s largest casino operator, has a gaming industry-high $22.8 billion in debt. The debt has been on the company’s books since 2008, when it was taken private in a $30 billion leveraged buyout by TPG Capital and Apollo Global Management.
The company has been in talks since September with bank lenders and bond holders in attempts to restructure the debt.
Two first-lien creditors — hedge funds Perry Corp. and Silver Point Capital — pulled out of the debt-restructuring talks last month and Caesars said last week another creditor had withdrawn from discussions. The firms that ended the talks no longer have restrictions preventing them from trading Caesars debt.
The operating company said Monday that it would not pay $225 million in bond interest payments, triggering a default on its debt.
The agreement announced Friday has been signed by all members of its first lien noteholder steering committee.
Shares of Caesars, valued at $1.9 billion, closed up 2.4 percent on the Nasdaq on Friday. The stock has fallen about 1 percent since Nov. 13, the day before Caesars said the operating company would need restructuring.
Caesars has almost 40 properties in 14 U.S. states and the Canadian province of Ontario. The company owns 10 hotel-casinos on or near the Strip.