Caesars Entertainment’s Bank Lenders Say They Might Drop Support for CEOC Bankruptcy Reorganization Plan
Caesars Entertainment Corp’s bank lenders say they might walk away from the bankruptcy reorganization plan they once agreed to support. If that happened, the $18 billion bankruptcy reorganization would be in disarray.
During a hearing at the US Bankruptcy Court in Chicago on Tuesday, the committee of bank leanders’ lawyer Kristopher Hansen said the lenders would inform the court on the current status of their deal on Wednesday, December 14.
Bank Lenders Might Pull Support
That is a little over one month before a confirmation trial in the Caesars Entertainment Operating Co’s two year old bankruptcy case. If a deal is not made by then, Hansen said his group would terminate a restructuring support agreement. If that happened, then the January 17 trial date would be postponed.
Bank lenders originally were among the first interested parties to agree to the CEOC plan. They say their continuing support is dependant on documentation which ensures the market value of non-cash considerations the banks will receive under the CEOC plan. That might sound technical, but it means that the casinos and hotels in the plan need to be valued at the price Caesars Entertainment claims they are worth.
Bankers Want Documentation on CEOC Assets
The bankers want to see documentation proving Caesars’ claims. If not, then they will change their vote on the plan, throwing the entire two-year process into chaos. In a November 21 court filing, the bank lenders stated the cold hard facts: “Simply put, without the consent of the bank leaders, the plan completely unravels.”
CEOC filed bankruptcy in January 2015, but junior creditors filed a lawsuit soon after claiming that Caesars had robbed CEOC of valuable assets mere months before the bankruptcy was announced. Caesars Entertainment has denied those charges, but the record shows that 12 different properties were moved from CEOC in August 2014.
Among those properties were valuable assets like Linq Hotel and Casino, which is located on the Las Vegas Strip.
$5 Billion Contribution to CEOC Bankruptcy
Creditors have spent over a year negotiating a payout in order to support the reorganization plan. That has resulted in the promise of a $5 billion contribution from Caesars parent company to settle those claims. Yet at the minute that one key set of votes appears to be satisfied, another key factor has shown it might not be satisfied with the current plan.
Under the current plan, CEOC would split into two separate divisions: an operating company and a real estate investment trust. The real estate trust would be controlled by the leaders. The operating company will be controlled by the creditors.
US Trustee Opposition
Another group which has objected to the reorganization plan is the U.S. Trustee Program, a watchdog group inside the federal government. The US Trustee Program opposes legal releases that the plan would grant to Caesars Entertainment and its private equity sponsors, TPG Capital Management LP and Apollo Global Management LLC.
During the hearings on Tuesday, U.S. Bankruptcy Judge Benjamin Goldgar questioned the US Trustee Program about its opposition to the plan. Goldgar remarked that he does not understand why the federal watchdog would oppose the plan, if the various parties appear to support the plan now.
Effects of Bankruptcy on Caesars’ Plans
Caesars Entertainment’s bankruptcy plans appear to have hampered its plans for developments in other countries. Articles in Canadian financial publications earlier this year suggested that Caesars’ attempts to secure a Toronto casino license might require special wording, because of concerns that bankruptcy might have an effect on that casino’s operations.
This month, Caesars’ longstanding attempts to secure a gaming license in South Korea appeared to be on the rocks. Indonesia’s Lippo Group wanted to sell its shares of a joint venture with Caesars in South Korea. Eventually, these Chinese housing development firm, Guangzhou R&F, joined Caesars in a 50/50 joint venture called Incheon JV. The two announced a plan with benchmarks for financial contributions and construction, but hinted at special clauses to protect R&F in the event Caesars’ bankruptcy case went badly.
Caesars lost its effort to gain a casino license in Massachusetts, as rivals Wynn Resorts and MGM Resorts eventually secured the two most lucrative casino licenses. When faced with two or more massive, prestigious Las Vegas casino companies that have generations of experience developing casinos, Massachusetts gaming officials chose the ones which seemed more financially stable.
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