Caesars Swaps Bond Trustees as Creditors Battle Over Debt

Caesars Entertainment Corp. (CZR)’s largest unit replaced U.S. Bancorp as the trustee overseeing eight of its bond issues as the casino operator battles with creditors over reorganizing more than $20 billion in debt.

UMB Financial Corp. (UMBF), Law Debenture Trust Company of New York and Wilmington Savings Fund Society FSB will now be the trustees on the more than $9.7 billion of debt, Las Vegas-based Caesars Entertainment Operating Co. said today in a regulatory filing.

Caesars has been struggling to reconcile its debt load with U.S. consumers restraining discretionary spending since it was purchased in a $30.7 billion leveraged buyout put together by Apollo Global Management LLC (APO) and TPG Capital at the peak of the last takeover boom in 2008.

U.S. Bancorp “believed that holders of different tranches of debt issued by CEOC were likely to take inconsistent positions,” Stephen Cohen, a spokesman for Caesars at Teneo Holdings in New York, said in an e-mailed statement.

The $3.6 billion of 10 percent second-lien bonds due 2018 fell 0.8 cent to 34.8 cents on the dollar at 9:31 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the lowest level on record for those securities.

Caesars is clashing with a group of bondholders from its operating unit who objected to the company’s refinancing plans.

Default Notice

The casino operator sold a 5 percent stake in the largest and most-indebted subsidiary in May to outside investors. Caesars said that allowed it to remove a guarantee on the unit’s debt, a move analysts said weakens creditors’ negotiating power in a restructuring because they no longer have a claim on the parent company’s assets. Caesars also transferred assets, including the Bally’s, Quad and Cromwell casino-hotels in Las Vegas, to an affiliate.

One set of bondholders sent Caesars a notice of default last month. The group said it would “take all steps necessary” to rescind recent asset sales and restore the debt guarantees, Caesars said in a June 6 filing.

The group of 13 investors includes hedge funds and investment managers Appaloosa Management LP, Oaktree Capital Group LLC (OAK), Canyon Capital Advisors LLC, Caspian Capital LP and Contrarian Capital Management LLC, a person familiar with the matter told Bloomberg News last month.

Enforcing Contracts

A bond trustee enforces the contracts that govern fixed-income securities and makes sure interest payments are made on time.

UMB Financial will be in charge of the $2.09 billion of 11.25 percent notes due 2017, the $1.25 billion 8.5 percent debt due 2020 and the $1.5 billion of 9 percent securities due 2020, according to the filing.

Law Debenture Trust Company of New York will oversee the $248.7 million of 6.5 percent debt due 2016 and $147.9 million of 5.75 percent notes due 2017; Wilmington Savings Fund Society FSB will take charge of the $750 million of 12.75 percent securities due 2018, $190 million of 10 percent notes due 2015 and $3.6 billion of 10 percent bonds due 2018.

To contact the reporter on this story: Laura J. Keller in New York at lkeller22@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net Richard Bravo, Caroline Salas Gage

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