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Caesars places largest operating division into bankruptcy

15 January 2015

LAS VEGAS -- Caesars Entertainment Corporation placed its largest operating division into bankruptcy Thursday, taking the initial steps to eliminate almost $10 billion of debt and restructure the casino operator's troubled balance sheet.

The pre-packaged filing covering Caesars Entertainment Operating Co. has been agreed upon by 80 percent of the company's senior bondholders. It was filed in the U.S. Federal Bankruptcy Court in Chicago. The company hopes to emerge from bankruptcy later this year.

The action comes after several months of negotiations between Caesars officials and the company's primary bondholders and lenders over restructuring a large portion of the Las Vegas-based gaming operation's $22.8 billion long-term debt.

"We believe this restructuring is in the best interests of all of CEOC's stakeholders and will result in a sustainable capital structure for CEOC and value creation for all stakeholders,” Caesars Entertainment Chairman and CEO Gary Loveman said in a statement.

"The restructuring of CEOC is the culmination of a years-long effort to improve the health of CEOC’s balance sheet, which has included substantial investment in new and upgraded assets, especially in Las Vegas," Loveman said. "I am very confident in the future prospects of our enterprise, which will combine an improved capital structure with a network of profitable properties."

Caesars operates 40 casinos in 14 states and Canada, including 10 on or near the Strip. The iconic 4,250-room Caesars Palace is the only Las Vegas property covered by the CEOC bankruptcy filing.

Company officials have said the bankruptcy filing and financial restructuring will not impact day-to-day operations of its hotels and casinos, its interactive gaming operations or the company-owned World Series of Poker. The reorganization will not disrupt Caesars' Total Rewards customer loyalty program, which has more than 45 million members.

"The properties across the entire Caesars Entertainment network are open and will operate without interruption throughout CEOC's reorganization process," Loveman said.

The plan is to seek the court's approval to convert CEOC into a publicly traded real estate investment trust. CEOC is the largest of Caesars' operating units and controls the flagship Caesars Palace, Caesars Atlantic City, Harrah's Reno Casino and Hotel and more than a dozen regional properties.

CEOC 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 approximately 75 percent, from approximately $1.7 billion to approximately $450 million.

The property company would lease the yet-to-be-determined hotel-casinos to the management company for annual payments of $635 million. The lease payments will be guaranteed by Caesars Entertainment.

Senior-level creditors would receive a combination of equity in the company, cash and new debt in return for their support of the reorganization plan.

The filing created two bankruptcy actions. On Monday, junior-level creditors who are owed $41 million and believe they will be cut out of the restructuring efforts filed an involuntary bankruptcy petition in Delaware's federal court on Monday.

Caesars 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.
Caesars places largest operating division into bankruptcy is republished from