Caesars Entertainment is at last ready to drag its main operating unit, Caesars Entertainment Operating Co. (CEOC), out of bankruptcy.
Its bankruptcy reorganization plan was approved Tuesday by Judge Benjamin Goldgar in a Chicago court, putting to bed (we hope) a two-year saga that one of Caesars own lawyers described as “the largest and most complex bankruptcy in a generation.”
It involved a company debt so astronomically high it required a double-take; there were accusations of fraud and asset stripping; a former Watergate prosecutor turned up at one point, and a mediator resigned in frustration.
This, of course, makes it all sound entertaining. It wasn’t. It was a bankruptcy case. And at times it felt like it would never end, a thought that must have flashed across the mind of Judge Goldgar once or twice during the proceedings.
“It is a monumental achievement,” said a relieved Goldgar, as he gave the plan his blessing.
The Grand Plan
CEOC will shave $10 billion off its $18 billion debt load as part of the reorganization plan, while separating its US-based property assets from its gaming operations as it’s spun off into a real-estate investment trust.
Parent company Caesars Entertainment, meanwhile, will merge with subsidiary, Caesars Acquisition Co (CACQ.O), with a view to regrouping its casinos and hotels together.
CEOC filed for bankruptcy in January 2015 and was immediately sued by its junior creditors, who felt they were getting a raw deal, in a bid to hold the parent company to guarantee of CEOC’s debts.
They also accused the company of systematically stripping the bankrupt unit of its most prized assets, leaving it with nothing but distressed assets and unpayable debts, for the benefit of its controlling private equity backers.
It wasn’t until October 2016 that the last of its creditors come on board with a radically altered plan that offered them billions more in cash and increased equity in a reorganized Caesars, in return for dropping litigation and allegations of fraudulent behavior.
Terms Agreed with US Trustee
Caesars vaulted a final hurdle last week when it came to terms with the US Trustee. The bankruptcy watchdog had threatened to scuttle the entire process, lodging an official objection to the plan in December.
The watchdog said it was concerned about the “blanket immunity” the deal offered to Caesars’ controlling private equity backers, Apollo and TPG.
Caesars came to terms with the US Trustee on Friday, although the details of the deal have yet to be filed in court.
“Upon CEOC’s emergence, we will be positioned to strengthen our financial and operational performance by pursuing new opportunities to invest in and expand our brands and business,” Mark Frissora, president and chief executive officer of Caesars Entertainment, said in a statement.
CEOC is expected to emerge fully from bankruptcy later this year.