Caesars Entertainment Subsidiary Initiates Bankruptcy Procedures

14:19
17 Jan

As part of a financial restructuring plan, Caesars Entertainment Operating Company (CEOC), a subsidiary of Caesars Entertainment Corporation, filed for Chapter 11 bankruptcy protection. This move is a step in the process to restore the company’s huge debt that reportedly amounts to $18.4 billion.

We believe 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."

Under the plan, which received support from more than 80% of the first-lien bondholders, all the Caesars' properties will continue to operate as before. CEOC Chairman Gary Loveman believes that the successful implementation of this plan should significantly strengthen the company’s position and reduce its debt significantly.

Loveman explains that this latest step is the culmination of years-long efforts to improve the CEOC’s financial situation and he feels confident that a bright future awaits the company.

Filing for Chapter 11 should see debt reduced to about $8.6 billion and annual interest payments drop from $1.7 billion to $450 million. Bondholders’ backing of the plan increased after BlackRock sold $500 million of first-lien bonds to investors, demonstrating support for the restructuring.

However, as Bloomberg reports, those losing out in this plan are second-lien creditors. They claim that the insiders have moved assets out of their reach whilst paying themselves hundreds of millions and are requesting the court to appoint an examiner who will take a deeper look into the situation.

Should the court listen to the appeals of the second-lien noteholders, the company’s plans could be seriously hindered. The submitted petition lists the second-lien debt as $41 million. The plan that Caesars is currently trying to set in motion would leave these creditors unsecured and provide them with only a small fraction of their equity.

A court appointed examiner would take a closer look and it would be his job to discover if the allegations by the second-lien bondholders hold any merit. Whether the judge will listen to their appeals or not depends on numerous factors, but it seems that the restructuring plan could be a bit harder to implement than originally envisioned.

The claims are a transparent attempt to thwart a restructuring that has been agreed to by more than two-thirds of CEOC’s first-lien noteholders. The action is designed to injure CEOC while these junior creditors attempt to boost their standing." Caesars statement in response to Appaloosa’s court filings.;

Did you like this article?