Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Caesars Signs Agreement With Senior Creditors
Author: Joel R. Glucksman
Date: December 30, 2014
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Caesars Entertainment Corp. reportedly signed an agreement with its most-senior creditors on Dec. 19 to put its largest unit into bankruptcy, according to Bloomberg.
The deal is known as a lock-up agreement, and requires the company to put subsidiary Caesars Entertainment Operating Co. into bankruptcy by Jan. 15, the news source explained. The company will still need to get additional creditors to sign on for it to complete its plan to reorganize its $18.4 billion of debt.
A certain percent of first-lien bondholders will need to sign onto the agreement by mid-January for Caesars to file the bankruptcy papers, Bloomberg continued. This would allow the Las Vegas-based company to meet the voting threshold required to approve a bankruptcy plan.
Five first-lien bondholders have already signed the plan, sources told Bloomberg. These included Elliott Management, Brigade Capital Management, DDJ Capital Management, JPMorgan Asset Management and Pacific Investment Management Co.
On Dec. 16, the company triggered a default that started it on a road to bankruptcy by announcing that it will not pay $225 million in bond interest, according to Baltimore Brew. This has caused some uncertainty in cities that host the company’s casinos.
Reporting on the potential impact on Baltimore’s recently opened Horseshoe Casino, the Brew reported that everything was likely to be smooth in the short run. Caesars Entertainment Corp. placed ownership of several casinos into a new company – called Caesars Growth Partners – to separate them from its massive debts. These included Bally’s Las Vegas, Harrah’s New Orleans, Horseshoe Casino and Caesars’ interactive gaming business.
This move has angered bondholders and triggered a number of lawsuits, the news source reported. Bondholders feel that the creation of the new company represents a ploy to keep assets outside of the reach of a bankruptcy. Growth Partners was set up as a “temporary financing vehicle,” meaning that it can be liquidated within three years, causing the assets to return to the parent company. If Caesars is successful in its bankruptcy filing, it will be out from under its debt at that time.
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