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Caesars Entertainment Plans $4.85 Billion Debt Refinancing

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Sept. 18 (Bloomberg) -- Caesars Entertainment Corp., the largest owner of U.S. casinos, is raising $4.85 billion in bonds and loans to refinance debt, according to a regulatory filing today.

Citigroup Inc. is arranging a $3 billion term loan for the Las Vegas-based company as well as a $269.5 million revolving credit facility, according to a person with knowledge of the transaction who isn’t authorized to speak publicly and asked not to be identified. Caesars also plans to issue $1.35 billion of second-lien notes and $500 million of first-lien debentures, according to the filing. The proceeds will be used to repurchase commercial mortgage-backed securities and a $450 million senior-secured facility.

The most indebted U.S. gaming company. which is controlled by Apollo Global Management LLC and TPG Capital, is refinancing debt through the Caesars Entertainment Resort Properties at the PropCo unit, with most of its more than $23 billion of debt held by the operating company, or the OpCo. The move signals its parent’s plans to shift assets away from lenders at the OpCo in the case of a bankruptcy, according to Fitch Ratings analyst Alex Bumazhny.

“This was the next big maturity wall they had to address and it removes some of the overhang,” Bumazhny said in a telephone interview. “The overarching theme has been that the sponsors have found a way to solidify the PropCo entity, and to safeguard the online gaming assets, from a possible default at the operating company.”

Octavius Tower

With the closing of the refinancing transaction, Caesars will shift the equity interests of subsidiaries that own properties such as the Octavius Tower at Caesars Palace Las Vegas and “Project Linq” to another unit, which will be an issuer under the new financing, according to the filing.

Shares of Caesars slumped as much as 15 percent to $22.11 in New York on trading volume more than five times the three-month daily average, according to data compiled by Bloomberg. The stock had more than tripled this year though yesterday.

The company’s $3.3 billion 10 percent notes maturing in December 2018 slumped 2.5 cents to 60.5 cents on the dollar, to yield 23.5 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. That’s the biggest drop in price this year on the debentures, the data show.

New Offering

The company is rated CCC+ by Standard & Poor’s and one level lower at Caa2 at Moody’s Investors Service. Bonds in the S&P CCC category are considered vulnerable to nonpayment, with issuers dependent on favorable conditions to make good on their debt.

The company is seeking to raise as much as $1.18 billion by offering shares in Caesars Acquisition Co., a new entity that will own stock in its online gaming business as well as two casinos in Las Vegas and Baltimore.

Apollo and TPG acquired Caesars in 2008 for about $30 billion and still hold a 70 percent stake. The private-equity firms received as much as $22.3 billion in financing to fund the biggest buyout of a casino operator.

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

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

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