Caesars Gets Restructuring Deal with Senior Lenders

On Aug. 21, Caesars Entertainment Corp. announced that it had struck a deal with two of its largest debt holders.

This came after it ended negotiations with first-lien creditors who did not approve the company’s massive reorganization plan for its largest operating division, Caesars Entertainment Operating Co.

A bankruptcy judge had previously ruled that the company could not pursue an accelerated appeal from the court’s decision to reject the restructuring plan, which would have enabled bondholders to pursue lawsuits against Caesars.

The approved agreement with senior lenders

The agreement is effective immediately and has now received full support from senior lenders, according to a Bloomberg report. This new deal is significant because it involved its two largest debt holders, with obligations totaling $11.7 billion. Further, the company stated that this is the first step toward establishing a revised restructuring plan in the near future.

Recent bankruptcy filings note that the new agreement would eliminate $19.9 billion in total obligations for the CEOC by redistributing the debt to several new Caesars companies.

Caesars’ original bankruptcy plan rejected

The company filed for Chapter 11 bankruptcy protection for Caesars Entertainment Operating Co. in January. In its bankruptcy plan, Caesars intended to convert the CEOC into a real estate investment trust, which would effectively separate the division into two companies. The CEOC would become a real estate investment trust owning the property and the building as an operating company leasing the casinos.

The company claimed that the CEOC has become insolvent, accounting for $18.4 billion of Caesars Entertainment Corp.’s $22.8 billion debt, the largest debt total in the casino gaming industry. With the move, Caesars would have effectively eliminated $10 billion in debt from its books.

In July, Caesars obtained support for the reorganization plan from 80 percent of its first and second tier debt holders, which would have provided the company with a six-month exit from bankruptcy. However, 20 percent of creditors rejected the deal. In turn, second-lien creditors have filed multiple lawsuits over the transfer of the casino properties into Caesars Growth Partners, which would have been folded back into Caesars Entertainment Co. Caesars’ plan to restructure Caesars Palace, Caesars Atlantic City, Harrah’s Reno and various other regional casino properties still remains in jeopardy with the rejected plan, despite the approved agreement.

In a statement to the court Aug. 17, Caesars explained that it outlined numerous offers for creditors, which included cash payouts between five to ten percent of the value of the CEOC’s first and second-tier bank debt as part of the REIT created with the CEOC. Caesars would then pay out 25 percent of its free cash flow to compensate second-lien creditors and holders of the bank debt on an annual basis. All told, Caesars would make an initial payment of $62.5 million to all creditors. Company officials also explained in court papers that it will not be able to fulfill its debt repayments without reaching a restructuring deal with its full list of creditors.

The future of Caesars after the new agreement

Currently though, the specific details of the rejected plan remain the same, but Caesars is working with its senior debt holders to revise the reorganization of the CEOC.

Caesars also intends to appeal the court’s decision not to accelerate its appeal of the rejected plan by citing four lawsuits sought by bondholders that could potentially force the entire company into insolvency. However, the company still needs most of its second-lien bondholders to approve a new restructuring plan to prevent these lawsuits.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.