Caesars Woos Bondholders With $1.2 Billion Bankruptcy Boost

  • Casino company says new offer must be accepted by Sept. 23
  • Previous offer totaled about $4 billion in cash, debt, shares

Caesars Entertainment Corp. offered to boost its contribution by more than $1.2 billion to win bondholder support for the reorganization of its bankrupt operating unit.

Should holdout bondholders, or other creditors who have previously supported the company, refuse to sign on by midnight Sept. 23, the Las Vegas-based gambling giant may abandon its plan to sponsor a reorganization, Thomas Kreller, a lawyer for Caesars, said Wednesday in Chicago federal court.

“Come Friday, there will either be a fully consensual plan or something else that is not in the current plan,” he said. “It is subject to all the other major creditor groups agreeing. It requires them to come in and say yes and contribute enough to fill the hole.”

The extra cash, debt and stock, coupled with a cut in recoveries for more senior creditors, would increase the payment to holdout bondholders by $1.6 billion. Apollo Global Management LLC and TPG Capital, which took Caesars private in a 2008 leveraged buyout, would see their stakes in the reorganized company reduced.

In a statement Wednesday, Caesars said it has asked lenders and senior bondholders who have previously supported the company to give up “hundreds of millions of dollars” to make the plan work.

Second-Lien

Caesars, which put the unit into Chapter 11 in January 2015, has been negotiating with investors who hold more than half of the company’s $5.5 billion in second-lien notes. 

Bruce Bennett, an attorney for the second-lien bondholders, did not immediately respond to an e-mail requesting comment on the new proposal.

Under the reorganization plan, the non-bankrupt parent, Caesars Entertainment Corp., would be combined with Caesars Acquisition Co. Apollo’s and TPG’s shares of Caesars Entertainment, but not Caesars Acquisition, would be “depleted” under the proposal announced Wednesday. Creditors of the bankrupt operating unit would own 62 percent of the new company, according to the statement.

U.S. Bankruptcy Judge A. Benjamin Goldgar has said that to get some of the second-lien bondholders to support a plan would probably require about $1.2 billion more than Caesars had previously on the table. Caesars had offered to contribute cash, debt and stock worth about $4 billion to help reorganize the unit, known as CEOC.

Company ‘Optimistic’

“Caesars Entertainment believes this proposal meets the requirements of the holders of CEOC’s second-lien notes and is optimistic that such proposal will be acceptable,” the company said.

Part of the additional contribution would consist of more than $100 million in cash from individual directors and officers, funded through insurance, Caesars said. Also, first-lien banks and bondholders would see a “small” reduction in their recoveries, according to the statement.

The operating unit asked Goldgar to put off discussing some issues that were on the court’s agenda for Wednesday while negotiations continued. The judge denied a bondholder request to postpone the trial on confirmation of the plan, saying it will start on Jan. 17 as previously announced.

The current proposal sees the bankrupt unit being split into a real estate investment trust to hold the casino properties and an operating company to manage them.

Apollo and TPG took Caesars private in 2008. They later sold shares in Caesars and spun off assets to create Caesars Acquisition, which is publicly traded. Apollo, TPG and the other buyout sponsors control more than 60 percent of both companies.

The case is In re Caesars Entertainment Operating Co. Inc., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).

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