Caesars Entertainment’s primary operating division filed for
bankruptcy on Thursday in a move that’s likely to spur opposition and legal
action from creditors.
Caesars Entertainment Operating Co. (CEOC), owner or operator
of 44 hotels and casinos, said it filed for Chapter 11 in the U.S. bankruptcy
court in Chicago as part of a previously announced restructuring effort designed
to cut the company’s debt load.
The company said the bankruptcy and ensuing restructuring
will reduce debt to $8.6 billion from $18.4 billion and cut annual interest expenses
by about 75% to $450 million.
“This restructuring is in the best interests of all of
CEOC's stakeholders and will result in a sustainable capital structure for CEOC
and value creation for all stakeholders,” said Gary Loveman, CEO of Caesars
Entertainment. “The restructuring of CEOC is the culmination of a years-long
effort to improve the health of CEOC's balance sheet, which has included
substantial investment in new and upgraded assets, especially in Las Vegas.”
Caesars said that the plan has received support
from more than 80% of first-lien noteholders, a claim disputed by creditors who pushed for a bankruptcy proceeding in a Delaware court. Those creditors intended to
deny Caesars the opportunity to file for bankruptcy under its own terms and called for a probe into the company's financial activities, reported Bloomberg News earlier this week.
Creditors opposing the bankruptcy in Chicago claimed that less than 20% of first-lien
noteholders support the restructuring, Bloomberg News said, citing Delaware
bankruptcy court records. Still, the Delaware court declined to act.
With the restructuring, Caesars Entertainment’s owners — private
equity firms Apollo Global Management and TPG Capital Management — are trying
to improve the company’s financial health by splitting off Caesars’ Las Vegas
assets from its underperforming properties in Atlantic City and other regions.
In 2008, Apollo and TPG took Caesars (then known as Harrah’s
Entertainment) private in a $30 billion leveraged buyout. The company was
renamed Caesars Entertainment two years later and went public in 2012 but
hasn’t made a profit since the buyout.
For the nine months ended Sept. 30, Caesars Entertainment’s
net loss widened 48% from a year earlier to $1.76 billion, as the company paid
$1.95 billion in interest expenses and took a $95.2 million charge from the
early extinguishment of some debt. Revenue rose 2.7%, to $6.39 billion.
Caesars during the past year has been
detailing its restructuring plan and said last month that it would merge the
parent company with its Caesars Acquisition Co. division, which would operate
the Caesars Palace Las Vegas and own 11 Las Vegas properties.
The holdings in Las Vegas
include nine casino-resorts and the $550 million Linq Promenade
retail/entertainment district. The first phase of Linq opened New Year’s Eve 2013.
The company’s restructuring is subject to approval of the
bankruptcy court and the release of all pending and potential litigation claims
Caesars said Thursday that its hotels will remain open and
operating “in the ordinary course.”