(Bloomberg) — A group of Caesars Entertainment Corp. bondholders declared that the casino company’s largest unit is in default after it pledged collateral to senior creditors without giving them similar claims.
Wilmington Savings Fund Society, a trustee representing holders of $3.7 billion of Caesars Entertainment Operating Co.’s 10 percent second-lien notes due December 2018, said failure to grant them a claim on certain assets constitutes a default, Las Vegas-based Caesars disclosed yesterday in a U.S. Securities and Exchange Commission filing.
Caesars, taken private in a $30.7 billion leveraged buyout by Apollo Global Management LLC and TPG Capital in 2008, is in talks with the senior creditors of its biggest unit to craft a plan that would reduce the consolidated company’s $24.2 billion in long-term debt, according to people with knowledge of the discussions. Investors are jockeying for claims since the company doesn’t have sufficient assets to mollify all creditor classes.
Gary Thompson, a spokesman at Caesars, declined to comment beyond what was disclosed in the filing.
The second-lien bonds traded at 22 cents on the dollar yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Holders who own at least 30 percent of those securities “may accelerate the notes upon an actual event of default,” according to the filing. Caesars has 60 days to take action that would avoid a default.
Last month, the casino operator granted more senior bondholders and its loan investors the right to possible proceeds from lawsuits brought against it, including claims it fraudulently moved assets away from investors. The more junior debtholders want a similar pledge.
In August, certain bondholders sued the company, saying it fraudulently moved assets after Caesars sold a 5 percent stake in its operating unit to undisclosed investors. That meant some bondholders would no longer hold a right to the parent company’s assets, leaving them with less bargaining power in talks over the debt.
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