Caesars Entertainment Operating Co (CEOC), the main operating unit of Caesars Entertainment Corporation, is to file for Chapter 11 bankruptcy protection by mid-January 2015 as it aims to cut its debt problems.
The subsidiary, which includes the land-based Harrah’s Atlantic City facility, is losing hundreds of millions as it attempts to handle debts worth $18.4 billion (€15 billion).
The proposed action will reduce CEOC’s debt to $8.6 billion, the company said, and is to take place after it reached a deal with all members of the first lien note-holder steering committee on Friday.
Caesars is trying to arrange a pre-packaged bankruptcy that gives its private equity owners a chance to still make money by giving them ownership in two recently-created subsidiaries that will not be part of the Chapter 11.
These two companies are an operating entity and a publicly-traded real estate investment trust (REIT) that will own a newly-formed property company.
Gary Loveman, chairman of CEOC, said: “The planned restructuring of CEOC will allow us to establish a strong and sustainable capital structure for CEOC and maximise value for our stakeholders.
“I want to thank this creditor group for its support of the restructuring. We believe the financial restructuring plan we are announcing today is in the best interests of all of CEOC’s stakeholders.
“We look forward to continuing to welcome guests across our network throughout this process. Business operations at all properties and the Total Rewards program will continue as usual throughout the balance sheet restructuring process.”
After years of losses, Caesars has been negotiating with creditors over its efforts to restructure operations.
CEOC said last Monday that it would not pay $225 million in bond interest payments, triggering a default on its debt.
Under the terms of the bankruptcy, Caesars said that annual interest expense would be reduced by approximately 75%, from approximately $1.7 billion to approximately $450 million.
“The formation of a publicly-traded REIT would also allow CEOC to significantly reduce its leverage by creating two better capitalised companies with vastly improved cash flow generation,” Loveman said.
source : www.igamingbusiness.com