The major creditors of Caesars Entertainment’s largest operating company have agreed to a settlement that paves the way for the heavily indebted division to emerge from federal bankruptcy protection.
Days after Caesars reported that talks with the senior lenders had stalled, the parent company announced last month that bank and first-lien bondholders owed around $12 billion of Caesars Entertainment Operating Co.’s debt are now behind a restructuring of CEOC as a casino management company whose sizable property assets will be spun off into a real estate investment trust.
Caesars says the new structure will erase $10 billion of CEOC’s industry-high $18.4 billion of debt and allow it to focus on negotiating an agreement with second-lien bondholders that it can bring to the federal judge overseeing the reorganization by November.
After missing an interest payment due last December, CEOC entered Chapter 11 protection in January amid a flurry of lawsuits from junior creditors challenging a series of earlier moves by Caesars’ private-equity owners that they say stripped CEOC of the company’s most profitable gaming assets to shelter them from an eventual disposition in U.S. Bankruptcy Court.
CEOC operates Caesars Palace in Las Vegas, Caesars Atlantic City and a dozen or so regional casinos.
Caesars is majority-owned by private-equity firms Apollo Global Management and TPG Capital, who originally took the company private in a $31 billion leveraged buyout completed just as the Great Recession hit in 2008, battering casino revenues in Las Vegas and nationwide and saddling Caesars with debt service that would prove untenable.