Caesars to Distribute $1.75 Billion Refinancing Term Loan

Caesars Entertainment Corp. (CZR) is getting support from the loan market for its plan to refinance debt due next year at its largest unit.

The casino operator distributed a $1.75 billion loan to lenders today, two days after it proposed to lower the interest payment on the financing, according to a person with knowledge of the deal. The floating-rate debt will be used to pay down borrowings at its Caesars Entertainment Operating Co. coming due next year, according to a May 6 statement.

The Las Vegas-based company has carried out more than 45 transactions to reduce debt and to push out maturities since a 2008 buyout by Apollo Global Management LLC and TPG Capital left it with more than $23 billion in debt. This latest plan to refinance shorter-term borrowings “does little” to avoid a restructuring at the CEOC unit that will impair creditors, Moody’s Investors Service said in a report last week.

The term loan B pays interest at 8.75 percentage points more than the London interbank offered rate, with a 1 percent minimum on the lending benchmark, according to the person, who declined to be identified without authorization to speak publicly. The debt, which is being arranged by Credit Suisse Group AG, was earlier being offered at a 9.5 percentage-point margin.

Stephen Cohen, a spokesman for Caesars, didn’t return an e-mail seeking comments on the loan rates.

While the transaction “marginally improves” its near-term liquidity, it doesn’t fix an $18 billion debt burden for a unit that generated sales of only $6.3 billion last year, Moody’s said.

Bondholder Claims

The 2017 loan was sold to investors at 99.25 cents on the dollar, reducing proceeds for the company and increasing yield for investors, according to the person. It was initially being offered at 98 cents on the dollar. The loan was bid up above par at as much as 100.5 cents on the dollar after it began trading, according to Markit Ltd.

The debt is being raised as part of a series of transactions the company announced last week, including one in which it sold a minority interest in its operating unit that may pave the way for a restructuring on favorable terms for the company.

Caesars sold a 5 percent stake in CEOC to undisclosed investors, according to the May 6 statement. The sale means the company may be able to insulate parent company’s assets from bondholder claims.

Bondholders have locked horns with the company, sending letters protesting steps being taken, including asset transfers away from the CEOC unit.

The company’s 9 percent, $1.5 billion first-lien bonds coming due in February 2020, dropped to a low of 78.125 cents on the dollar last week, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net

To contact the editors responsible for this story: Faris Khan at fkhan33@bloomberg.net Chapin Wright

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