\nCaesars Entertainment Corp. made good on previous predictions and skipped a $225 million interest payment Monday while the casino operator continued debt reduction talks with lenders.<\/p>\n
\tThe interest payment, due on second-tier debt covering its Caesars Entertainment Operating Co., business unit, has a 30-day grace period.<\/p>\n
\tMissing the payment is viewed by analysts as the first step toward taking CEOC in a prepackaged Chapter 11 bankruptcy reorganization.<\/p>\n
\tCECO is the largest of the Las Vegas-based company\u2019s divisions and controls the flagship Caesars Palace, Harrah\u2019s Reno, Caesars Atlantic City, and several regional properties.<\/p>\n
\tAccording to a filing with the Securities and Exchange Commission Monday, Caesars had $1.5 billion in cash as of Sept. 30.<\/p>\n
\tCaesars has a gaming industry-high $22.8 billion in debt. Since September, the company has held talks with bank lenders and bond holders in attempts to restructure the debt.<\/p>\n
\tIn the SEC filing Monday, Caesars said the company \u201celected not to pay\u201d the interest payment. In a separate SEC filing on Friday, Caesars said it \u201cbelieved an oral agreement in principle had been reached between certain parties.\u201d<\/p>\n
\tSources said a framework to a restructuring agreement includes a prepackaged bankruptcy covering CEOC \u2014 the business unit that holds more than 80 percent of the company\u2019s overall debt \u2014 and moving the casinos controlled by CEOC into a real estate investment trust.<\/p>\n
\tIf the talks were to collapse before the 30-day grace period expires, Caesars could elect to make the interest payment. The company would only be in default if it does not make the payment.<\/p>\n
\tTwo first-lien creditors \u2014 hedge funds Perry Corp. and Silver Point Capital \u2014 bailed on the debt restructuring talks last month and Caesars said last week another creditor had withdrawn from discussions. The firms that ended the talks no longer have restrictions that prevented them from trading Caesars debt.<\/p>\n
\tThe current restructuring plan offers the first-lien debt holders nearly 100 percent recovery. Second-lien bondholders will get an undisclosed amount of equity in the new company. The bankruptcy filing is expected to take place in January.<\/p>\n
\tHowever, analysts from Fitch Ratings Service believe Caesars\u2019 financial structure is too complicated to be resolved in a prepackaged bankruptcy.<\/p>\n
\tThe REIT concept would split CEOC into two companies, including one to own the real estate for many of the company\u2019s casinos. A second company would manage the properties.<\/p>\n
\tOther analysts have expressed support for the REIT idea.<\/p>\n
\tCaesars\u2019 debt has been on the company\u2019s books since 2008 when the it was taken private in a $30 billion leveraged buyout by TPG Capital and Apollo Global Management.<\/p>\n
\tCaesars is now the nation\u2019s largest casino operator, with almost 40 properties in 14 U.S. states and the Canadian province of Ontario. The company owns 10 hotel-casinos on or near the Strip.<\/p>\n
\tCaesars\u2019 other major operating division is Caesars Growth Partners, which is publicly traded on Nasdaq as Caesars Acquisition Co. The business, 58 percent owned by Caesars Entertainment, includes The Cromwell, the Linq Hotel, Bally\u2019s Las Vegas, Planet Hollywood Resort, Harrah\u2019s New Orleans, a 41 percent interest in Horseshoe Baltimore and Caesars Interactive Entertainment.<\/p>\n
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