\nHoward Stutz, Las Vegas Review-Journal \u00b7 January 22, 2015 at 6:50 pm
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\n\tThe efforts by Caesars Entertainment Corp. to restructure 81 percent of its gaming industry-high debt will be a \u201cdrawn out\u201d process, a Wall Street ratings service warned investors Thursday.<\/p>\n
\tCaesars placed its largest operating division into a pre-packaged bankruptcy last week in Chicago with a reorganization plan than was agreed upon by 80 percent of the company\u2019s senior bondholders.<\/p>\n
\tHowever, Caesars second-tier bondholders filed a separate involuntary bankruptcy a few days earlier in Delaware. The company is also facing lawsuits in New York and Delaware over its restructuring efforts by lenders and bondholders.<\/p>\n
\tFitch Ratings Service analyst Alex Bumazhny told investors the restructuring of Caesars Entertainment Operating Co., which will eliminate almost $10 billion of the division\u2019s $18.4 billion debt load, wasn\u2019t a simple fix.<\/p>\n
\tLate last week, a federal judge in New York ruled the company violated federal law when it transferred ownership of several casinos into a new operating division while several first lien lenders said they weren\u2019t in favor of the reorganization.<\/p>\n
\t\u201cWe continue to hold that the CEOC bankruptcy will be protracted given the complexity of the capital structure, the inter-company asset transfers and sales and the contentious dealings with creditors to date,\u201d Bumazhny said.<\/p>\n
\tA Caesars spokesman was unavailable for comment.<\/p>\n
\tThe reorganization came about after several months of negotiations between Caesars officials and the company\u2019s primary bondholders and lenders. Caesars has companywide long-term debt of $22.8 billion.<\/p>\n
\tUnder the company\u2019s bankruptcy plan, Caesars seeks court approval to convert CEOC into a publicly traded real estate investment trust. CEOC controls Caesars Palace, Caesars Atlantic City, Harrah\u2019s Reno and more than a dozen regional properties.<\/p>\n
\tThe REIT concept would split CEOC into two companies, including one owning real estate for many of the company\u2019s casinos. A second company would manage the properties and pay a rent to the ownership company.<\/p>\n
\tFIRST-LIEN LENDERS BALK<\/p>\n
\tBumazhny said he wasn\u2019t surprised several first lien lenders are now balking at the agreement. The proposed recovery includes $1.3 billion of new debt, and the analyst said he would give the division a negative rating after accounting for the lease payments and other expenses.<\/p>\n
\t\u201cThe term loans\u2019 cash recovery mostly hinges on Caesars selling $2.6 billion of Caesars Palace mortgage and debt to third-party investors, all compounded by Caesars asking the lenders to release their parent guarantee,\u201d Bumazhny said.<\/p>\n
\tCaesars accumulated the bulk of its debt in 2008 when it was acquired by private equity companies TPG Capital and Apollo Global Management in a $29 billion leveraged buyout.<\/p>\n
\tBumazhny warned the private equity firms might have to \u201cdilute their positions in Caesars\u201d in order to make concessions to some angry creditors.<\/p>\n
\tThe analyst did have some good news for Caesars investors: the restructuring \u201cas not necessarily another Dynegy,\u201d in reference to Dynegy Inc, a Houston-based energy company that went through a complicated year-long bankruptcy restructuring in 2012.<\/p>\n
\tJUNIOR CREDITORS REQUEST EXAMINER<\/p>\n
\tBumazhny was unsure if a Delaware judge would grant the request of junior level creditors to appoint an examiner for Caesars. The involuntary filing accused Caesars of having \u201clooted\u201d the best properties from the parent company by removing them from the restructuring puzzle.<\/p>\n
\tCaesars Growth Partners, formed less than two years ago, is 58 percent owned by Caesars Entertainment. It owns six properties and the company\u2019s interactive gaming division. Caesars Growth Partners would merge back into the parent company after the bankruptcy is concluded to provide Caesars $1.7 billion in reorganization cash.<\/p>\n
\t\u201cWe think the situation is less clear cut relative to Dynegy, where the valuation shortfall was much more egregious,\u201d Bumazhny said. \u201cWe generally think that the valuation ascribed by Caesars to the major assets that were sold or transferred was on the light side.\u201d<\/p>\n
\tHe said Caesars would have problems selling casinos to outside parties because the properties would then be removed from the company\u2019s 45 million-member Total Rewards player loyalty program.<\/p>\n
\tCaesars operates 40 casinos in 14 states and Canada, including 10 on or near the Strip. The 4,250-room Caesars Palace is the only Las Vegas property covered by the CEOC bankruptcy filing.<\/p>\n
\tA judge in Chicago granted a series of routine motions last week, allowing the casino operator to pay employees and critical vendors and maintain its customer rewards program.<\/p>\n
\tCompany officials have said the bankruptcy filing and financial restructuring will not affect day-to-day operations.<\/p>\n
No replies were posted for this topic.<\/p>\n","protected":false},"excerpt":{"rendered":"
Howard Stutz, Las Vegas Review-Journal \u00b7 January 22, 2015 at 6:50 pm Bookmark and Share The efforts by Caesars Entertainment Corp. to restructure 81 percent of its gaming industry-high debt will be a \u201cdrawn out\u201d process, a Wall Street ratings…<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"class_list":["post-8574","post","type-post","status-publish","format-standard","hentry","category-latest-casino-news"],"_links":{"self":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/8574","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/comments?post=8574"}],"version-history":[{"count":0,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/8574\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/media?parent=8574"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/categories?post=8574"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/tags?post=8574"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}