Caesars Debt Holders’ Law Firm Questions Asset TransfersChristopher Palmeri
Caesars Entertainment Corp. said a law firm representing some debt holders is challenging the casino company’s transfer of properties to affiliates.
Caesars received a letter on March 21 in which the debt holders accused the casino operator of breaching its fiduciary duty to creditors and demanded the deals be rescinded, according to a regulatory filing today.
The letter challenges two deals, one in October involving Planet Hollywood and a Baltimore property, and a second this month that included four resorts, in which the assets are being sold to Caesars Growth Partners, according to the filing by the Las Vegas-based company. The letter also questions the transfer last year of the Octavius Tower and Project Linq assets in Las Vegas to another entity, Caesars Entertainment Resort Properties.
Caesars, the largest owner of casinos in the U.S., has struggled to repair its balance sheet after a $30.7 billion leveraged buyout led by Apollo Global Management LLC and TPG Capital in 2008. The company has sold stock to the public, divested assets, bought back debt and restructured loans.
The gambling company last year created Caesars Growth Partners as a vehicle to raise cash and invest in new businesses. Caesars Growth is 58 percent owned by Caesars Entertainment, with the balance owned by Caesars Acquisition Co., a separately traded entity also created last year.
Caesars Growth Partners is seeking to raise $1.33 billion in loans to finance the deal announced this month involving the four resorts: the Bally’s, Cromwell and Quad hotels in Las Vegas, along with Harrah’s New Orleans, according to the filing today.
The letter from the law firm, that didn’t identify the debt holders, alleges that Caesars Entertainment Operating Co., a unit of Caesars Entertainment, is insolvent and that CEOC’s owners “improperly transferred or seek to transfer valuable assets” of the unit to affiliated entities, according to the filing.
The shares fell 3.8 percent to $22.02 at the close in New York. Caesars Acquisition dropped 4.7 percent to $15.27.
“The transactions were agreed to following a rigorous and independent process led by a special committee comprised solely of independent directors,” Caesars Entertainment said today in an e-mailed statement. “We strongly believe that there is no merit to the allegations being made and will defend ourselves vigorously and seek appropriate relief should any action be brought against the company.”