Caesars' Chapter 11 draws opposition from some creditors

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The pool at Caesars Palace in Las Vegas. Hotels will operate as usual while Caesars restructures, the company said.
The pool at Caesars Palace in Las Vegas. Hotels will operate as usual while Caesars restructures, the company said.

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 against Caesars.

Caesars said Thursday that its hotels will remain open and operating “in the ordinary course.”

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