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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Caesars resumes deferred compensation payments, but only for some

27 May 2015

Caesars Entertainment Corporation is making payments to a portion of the company’s current and former employees who lost a combined $78.6 million in deferred compensation when the casino giant’s largest operating unit filed for Chapter 11 bankruptcy in January.

In a statement Friday, Caesars spokesman Steven Cohen of New York-based Teneo Strategy said the company resumed payments this month to workers who were part of two of the five deferred compensation plans.

Distributions were halted when Caesars Entertainment Operating Co. filed a pre-packaged reorganization to slice away $10 billion of corporate debt.

Other former Caesars workers who are still owed deferred compensation or were part of supplemental retirement plans need to file claims with the U.S. Bankruptcy Court in Chicago by Tuesday if they hope to recover money owed to them.

Cohen wasn’t sure how many Caesars employees were again receiving payments.

On May 11, the company sent a memorandum to participants in two Harrah’s Entertainment Inc. supplemental savings plans for executives, saying the company was resuming distribution payouts immediately.

“Based on a review of plans and related documents, we determined Caesars Entertainment is likely to be jointly liable with CEOC for certain deferred compensation liabilities,” Cohen said. “As a result, we recorded and disclosed the liability and resumed the related payments that had been discontinued.”

Cohen said “the assets were held under trusts and in escrow agreements that have existed for many years.”

He disputed a report that one of Caesars private equity owners funded the payments and the matter was being looked at by the U.S. attorney for New Jersey.

“Caesars did not transfer assets supporting the deferred compensation to CEOC and we are not aware of any government investigation into our deferred compensation program,” Cohen said.

Caesars Chairman Gary Loveman was part of a deferred compensation program and was owed $71,427, according to Bankruptcy Court documents. Retired Harrah’s Entertainment Chairman and CEO Phil Satre is owed more than $6.67 million, according to the court filings.

Other top executives named in filings are Caesars Chief Financial Officer Eric Hession, $126,364; and the operating unit’s CEO, John Payne, $19,318. Former Harrah’s executive Michael Silberling, now CEO of Affinity Gaming, is owed $116,353.

It was unclear if any of the current or former employees were again receiving deferred compensation.

Deferred compensation plans allow employees to set aside a portion of their salaries, bonuses, stock options and other payments to draw on after retirement. The funds are not taxed until they are taken out of the plan.

Caesars sent notices this week and in late April to supplemental plan participants telling them they needed to file their claims by Tuesday with the court. Among those receiving notices were 63 retired Caesars employees who were part of various supplemental retirement plans inherited by the company over the years.

Combined, the group is owed more than $33 million.

The daughter of 32-year Caesars Palace casino host Kenneth Houng said she filed a claim with the court on behalf of her father, whose retirement checks were halted in January.

“How can they discriminate against 63 if the can reinstate (the others),” Nicole Houng said in an e-mail. “This bankruptcy is such a mess.”

The retired workers learned through a form letter that their monthly checks were halted. Several told the Review-Journal the checks were their primary source of income.

Cohen said the company would continue to review “the balance of the deferred compensation benefits and the terms and historical funding of escrowed assets.”

The issue came to light in March. State gaming regulators called the matter “embarrassing.”

Caesars General Counsel Tim Donovan told the Nevada Gaming Commission and Control Board that month that bankruptcy law does not allow a company in Chapter 11 to separate supplemental retirement plans from other unsecured creditors.

Loveman said in April the company was “quite sympathetic,” but was “limited” because the matter is in the hands of Bankruptcy Court. He said Caesars was looking “to see if there are any creative ways or solutions to try and help.”

Caesars is seeking court approval to convert the operating unit into a publicly traded real estate investment trust. The unit controls the flagship Caesars Palace, Caesars Atlantic City, Harrah’s Reno Casino and Hotel, and more than a dozen regional properties.

The REIT concept would split the operating unit into two companies, including one owning real estate for many of the company’s casinos. A second company would manage the properties. It’s unclear which resorts would be placed in the REIT.

The unit carries $18.4 billion of the company’s total debt. The bankruptcy restructuring, which could take up to a year to complete, would reduce the division’s debt to $8.6 billion. Annual interest expense would be reduced by about 75 percent, from $1.7 billion to $450 million.

The property company would lease the hotel-casinos to the management company for annual payments of $635 million.

Caesars has a gaming industry high $22.8 billion of debt and took on the bulk of its leverage following a $31 billion buyout by private equity firms in 2008.
Caesars resumes deferred compensation payments, but only for some is republished from Online.CasinoCity.com.