Supplier News

US – Caesars told Chapter 11 for operating unit will only protect the operating unit

By Phil - 14 October 2015

Caesars Entertainment’s operating unit, which sought bankruptcy protection in January, has been told by a federal judge that the bankruptcy of its operating unit can’t protect Caesars Entertainment Corp. from investors’ lawsuits.

Judge Robert Gettleman of the US District Court in Chicago said a bankruptcy judge’s decision ‘is not erroneous as a matter of law and is not an abuse of discretion.’

Caesars and its operating unit, Caesars Entertainment Operating Company, have been hit with lawsuits in Delaware and New York over asset transfers between the parent and the operating companies before it asked for chapter 11 protection in January. Creditors believe that Caesars’ owners; Apollo Global Management and TPG Capital, created a ‘good’ Caesars and a ‘bad’ Caesars, with the plan being to protect the most valuable assets while losing those with the worst debt by sending the bad Caesars into Chapter 11.

The judge ruled that the chapter 11 filing could protect the operating company but not Caesars’ parent company.

A Caesars spokesman said: “The district court’s ruling on the stay did not address in any way the merits of Caesars’ position in the New York litigation. Meanwhile, CEOC’s senior creditors have expressed their support for CEOC’s restructuring plan and the company is continuing its efforts to reach a consensual agreement with junior creditors.”

Caesars has now filed an amended plan of reorganisation that is looking to turn the unit into a real-estate investment trust.

The move would eliminate about $10bn in aggregate debt from Caesars’ balance sheet.

Caesars stated: “The Amended Plan provides for a comprehensive restructuring transaction that is supported by holders of more than 80 per cent of CEOC’s (Caesars Entertainment Operating Company) First Lien Bank Debt and First Lien Notes pursuant to restructuring support agreements CEOC has entered into with both creditor groups. Importantly, the Amended Plan also provides for enhanced recoveries to CEOC’s junior creditors.”

Now that CEOC has obtained the support of approximately $12bn (or two-thirds) of its capital structure, it can continue its ongoing efforts to seek consensus with its junior creditors while also pursuing a path to emergence consistent with agreed upon milestones. CEOC is not seeking a hearing to approve the Disclosure Statement and solicit votes on the Amended Plan at this time. Under an existing court order related to the ongoing investigation by the court-appointed Chapter 11 examiner, the earliest CEOC can request a hearing to approve the Disclosure Statement is December 15. The extension sought will provide CEOC additional time to pursue its Amended Plan on an exclusive basis while it seeks to build further consensus for the Amended Plan.

CEOC noted that its operations have continued uninterrupted throughout the financial restructuring process and that its business performance improved in the first half of 2015 compared with the prior year, driven by, among other factors, marketing, labour efficiencies and strong hospitality revenues.

“If confirmed and consummated, the Amended Plan, which settles litigation claims for significant contributions of cash and securities from Caesars Entertainment Corporation and improves recoveries across CEOC’s capital structure, will eliminate approximately $10bn in aggregate debt from CEOC’s balance sheet,” it added. “Specifically, the Amended Plan provides for a tax-efficient corporate and balance sheet restructuring that maximises the value of the businesses by converting CEOC into a real estate investment trust (REIT) with ongoing credit support from Caesars Entertainment. The Amended Plan also outlines recoveries for creditors that are materially improved from the original Plan of Reorganisation.”