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Best of Howard Stutz

Gaming Guru

Howard Stutz

Caesars plan to borrow $1.3 billion for asset shift hits opposition

27 March 2014

LAS VEGAS -- Caesars Entertainment Corporation said Wednesday a group of the company’s “unidentified note holders” want to kill off Caesars Growth Partners, the casino operator’s growth-oriented affiliate.

The company revealed the matter in a filing with the Securities and Exchange Commission in which it said Caesars Growth Partners is seeking $1.3 billion in loans to fund the purchase of four casinos announced this month.

Caesars said it received a letter from a law firm representing holders of existing notes who want to rescind all the transactions that created Caesars Growth Partners last year. The letter claims Caesars has breached its “fiduciary duties” to the company’s creditors.

Caesars Entertainment owns 58 percent of Caesars Growth Partners, which was created to help repair the company’s balance sheet. Caesars Growth Partners owns Planet Hollywood, the under-construction Horseshoe Baltimore, a hotel tower at Caesars Palace and the company’s interactive gaming business, which includes its online gaming operations in Nevada and New Jersey.

Caesars Growth Partners said the loan would be used to acquire Bally’s Las Vegas, The Quad, The Cromwell and Harrah’s New Orleans in a $2.2 billion transaction. Caesars Entertainment, which has a gaming industry-high $23 billion in long-term debt, said it would use the proceeds from the sale to pay down debt.

Nevada gaming regulators approved the deal this month. The letter demands the transactions be rescinded or terminated.

“(Caesars) strongly believes there is no merit to the letter’s allegations and will defend itself vigorously and seek appropriate relief should any action be brought,” the company said in the filing.

Analysts have long said that Caesars’s debt load is unsustainable.

The company said there would be no changes in the operations of the properties. A shared-services joint venture will provide operating services to all of Caesars subsidiaries. The casinos will continue to operate under the company’s Total Rewards loyalty program.

Caesars’ private equity owners, TPG Capital and Apollo Management Group, each put $500 million into Caesars Growth Partners. High-profile investors, including hedge fund billionaire John Paulson, who owns 12 million shares, bought in. Soros Fund Management, the investment arm of billionaire George Soros, a high-profile supporter of liberal and progressive political causes, owns 6 million shares.
Caesars plan to borrow $1.3 billion for asset shift hits opposition is republished from