Caesars’ show goes on as OpCo seeks bankruptcy
Caesars Entertainment Operating Co Inc (CEOC), a subsidiary of Caesars Entertainment Corp (CEC), is to enter voluntary bankruptcy in mid-January 2015, the parent said on Friday in a filing to Nasdaq in New York.
But the casino brand promised business as usual for its gaming, hotel and entertainment operations.
The consolidated company’s long-term debt reached US$24.2 billion at the end of June according to investment analysts.
On December 15 CEC said in a filing it had “elected not to pay” US$225.3 million in interest to junior creditors while it continued debt-restructuring negotiations with its more senior lenders. The missed payment to the junior lenders triggered a default. But CEOC was able to reach agreement with first lien note holders on debt restructuring.
Friday’s filing from CEC stated that a reorganisation under Chapter 11 of the U.S. Bankruptcy Code would reduce the debt of the CEOC unit by around US$10 billion. The exercise would provide for the exchange of approximately US$18.4 billion of outstanding debt for US$8.6 billion of new debt. Annual interest expense would be reduced by approximately 75 percent, from approximately US$1.7 billion to around US$450 million.
“The planned restructuring of CEOC will allow us to establish a strong and sustainable capital structure for CEOC and maximise value for our stakeholders,” said Gary Loveman (pictured), chairman of CEOC in a statement contained in the filing.
Mr Loveman added: “We look forward to continuing to welcome guests across our network throughout this process. Business operations at all properties and the Total Rewards [player] programme will continue as usual throughout the balance sheet restructuring process.”
Under the terms of a restructuring that will accompany the voluntary bankruptcy, CEOC will separate virtually all of its US-based gaming operating assets and real property assets into two companies. There will be an operating entity and a newly formed, publicly traded real estate investment trust (REIT) that will directly or indirectly own a newly formed property company.
The newly constituted property unit would lease its real estate assets to the new operating unit in exchange for annual lease payments of US$635 million, with the lease payments guaranteed by CEC.
On December 10 it emerged that the Caesars brand’s hopes for a new casino resort at Manila International Airport in the Philippines were fading in the short term. Cristino Naguiat, chairman of the local regulator the Philippine Amusement and Gaming Corp (Pagcor), said no new licences were expected during the remaining term of President Benigno Aquino, who steps down in mid-2016.
On December 18 the authorities in New York State in the U.S. announced that CEC’s bid to build a casino resort upstate in Woodbury – an area on the northeast fringes of the New York City metro area – had been rejected.
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