Caesars’ senior creditors agree to restructuring

Senior creditors owed $12 billion have agreed on a restructuring, the gambling group said. However, discussions with junior lenders including Oaktree Capital and Centerbridge Partners continue.

The largest and most senior creditors of Caesars Entertainment have settled on an agreement to restructure their portion of the firm’s roughly $23 billion in debt.

The bank restructuring support agreement is a key milestone in efforts to reach a consensual restructuring, the group said on 21 August. The terms are substantially similar to a bond restructuring agreement, dated 31 July, it continued.
The restructuring is supported by first lien bank lenders and first lien bondholders, which represent the most senior $12 billion of the capital structure, according to press reports.

The holders of senior secured bank debt have been offered pro rata shares of $1.99 billion in cash, $1.96 billion in newly issued first lien debt and another $1.45 billion in cash or new debt if the gaming and property firm fails to syndicate the claims to new lenders. 

The first lien noteholders have agreed to take a $207 million cash payment, $306 million new first lien operating company debt, which will be paid in cash if the debt is syndicated, $141 million of new second lien credit lines, $431 million in new first lien and $1.42 billion in second lien property company debt. In addition, the noteholders were offered 69.9 percent of the property company’s equity (through a series of put options and rights) and 100 percent of the operating company’s equity as well as a payment of $25 million a month until the full restructuring is approved.
The equity available falls to 17.5 percent if the first lien noteholders do not vote to accept the restructuring. 

The share price at the NASDAQ-listed company climbed from $6.87 to $8.47 between 20 and 25 August, on the back of the announcement.

Caesars and its operating company, Caesars Entertainment Operating Company (CEOC), are still in discussions with junior creditors to build support for a previously announced second lien restructuring agreement.

Junior bondholders including Appaloosa Management, Oaktree Capital Group, Tennenbaum Capital Partners and Centerbridge Partners, are seeking a stake in the company in exchange for their approval of a restructuring, Dow Jones reported. In their proposal, they would drop an ongoing lawsuit and receive 52 percent of the company.
CEOC, its parent owned by TPG Capital and Apollo Global Management, provides casino entertainment services and owns, operates or manages 44 gaming and resort properties in 13 states of the US and in five other countries. The agreement seeks to write-down some $10 billion in debt.

The company filed for bankruptcy protection in January. As part of the plan, Caesars is seeking to split its operating unit into two – a real estate investment trust (REIT) and an operating company which will lease the casinos from the REIT. Controversial internal reorganisations of the company ahead of it entering Chapter 11 have been at the centre of several creditor law suits. 

The company has also agreed to pay $20 million to settle US anti-money laundering lapses, Reuters reported last week.

Caesars has struggled with a growing debt pile following a leveraged buyout by Apollo Global Management and TPG in 2008, just before the financial crisis and recession hit.