Caesars Said to Negotiate With Unit’s Senior BondholdersLaura J. Keller
Advisers to a group of senior bondholders that owns debt in a unit of casino company Caesars Entertainment Corp. have entered into talks to restructure its borrowings, according to two people familiar with the situation.
Investment bank Miller Buckfire & Co. and law firm Kramer Levin Naftalis & Frankel LLP signed confidentiality agreements allowing them to see sensitive information as they seek a deal that would pare debt at the unit, said the people, who asked not to be named because the talks are private. The investors own portions of Caesars Entertainment Operating Co.’s $6.35 billion of first-lien bonds.
The advisers’ restricted status comes as Caesars, taken private in 2008 by Leon Black’s Apollo Global Management LLC and TPG Capital, moves toward a possible restructuring of about $19 billion of debt at its operating company. The unit hired law firm Kirkland & Ellis LLP last month to advise on the restructuring, a person with knowledge of the appointment said at the time. Blackstone Group LP has been working as the parent company’s adviser, the person said.
Senior bondholders have an incentive to negotiate with the operating company as Caesars seeks to reconfigure its capital structure. Without a deal to significantly cut debt, first-lien bondholders risk that their investments will weaken as the company diminishes its approximately $3 billion of cash to pay interest to lower-ranking creditors.
Caesars has had only one profitable year since 2008, when it was saddled with $30.7 billion of debt in the buyout, according to data compiled by Bloomberg. The company now has $21 billion of long-term borrowings, the data show.
Gary Thompson, a spokesman for Caesars, Phillipa Yule, a spokeswoman for Kramer Levin, and Chuck Dohrenwend, a spokesman at Abernathy MacGregor Group for Miller Buckfire, declined to comment. Bud Perrone, a spokesman for Apollo at Rubenstein Associates Inc., and Lisa Baker, a spokeswoman for TPG at Owen Blicksilver Public Relations Inc., declined to comment.
The company has agreed to pay the fees Kramer Levin and Miller Buckfire are billing for advising first-lien clients, the people said. That signals the group is willing to negotiate with the company rather than solely pursue an antagonistic strategy that aims to force a default, said one of the people.
The first-lien bondholders that Miller Buckfire and Kramer Levin are advising won’t initially have access to the information, according to the people.
Caesars’ talks with the first-lien group contrasts with contention between the company and a group of its lower-ranking creditors. Those bondholders, which own second-lien debt and are represented by Jones Day LP, sent the operating company a notice on June 5 that alleged it defaulted on its obligations when it transferred assets to an affiliate.