Caesars Entertainment has been spending much of the last year making a variety of moves designed to reorganize debt and separate the parts of the company that are working from those that are losing money.
Though entities like Caesars Growth Partners, the company has found ways to keep its high performing or promising assets away from the massive debts plaguing the parent company.
That’s apparently what Caesars planned to do with their rewards program, known as Caesars Enterprise Services.
But now, hedge fund mogul David Tepper is among a group of bondholders that are looking to stop that transfer in an effort to keep the valuable program as a part of the main company.
Already, four of the 12 casinos that were in operation at the start of 2014 have either shut down or plan to do so before the end of the summer.
Regulators Consider Transfer
The battle comes after the private-equity firms that own Caesars starting asking for approval from state gaming commissions to transfer the rewards entity. On Thursday, it was expected that the New Jersey Casino Control Commission would take a vote on the move, but that was delayed until next month. The state’s Division of Gaming Enforcement said that they are currently investigating the request, and haven’t yet determined whether or not they’ll recommend the state approve the transfer.
But Tepper and other major debt holders have now argued against that move. They say that separating the rewards program from the parent company could be a precursor to putting two more Caesars properties in Atlantic City (Bally’s Atlantic City and Caesars Atlantic City) into bankruptcy.
That’s not a future that New Jersey officials would like to see. Already, four of the 12 casinos that were in operation at the start of 2014 have either shut down or plan to do so before the end of the summer.
While that may make it easier for the remaining casinos to grab a larger slice of Atlantic City’s shrinking gambling pie, two more casinos on the verge of closing would eat even further into the city’s tax base and complicate any attempts to transition to a post-casino economy.
Bondholders Fight Company Restructuring
Many bondholders have been fighting the attempts to restructure Caesars every step of the way. According to Tepper and others, the firms that now own the company, including Apollo Global, are simply using organizational maneuvers to protect their strongest assets from creditors while allowing the main branch of Caesars to fall apart. By splitting the company this way, the owners might be able to put Caesars into bankruptcy while still moving forward with their best assets through Caesars Growth Partners (CGP).
But if those plans are really in the works, they could be thrown for a loop if the loyalty program isn’t allowed to be transferred over to CGP. That entity allows Caesars to track its players and includes their extensive customer list, valuable assets that are critical to the successful operation of any future form Caesars might take.
That means that if the owners want to run the company through CGP, bondholders would then have significant leverage in the bankruptcy proceedings if Caesars proper still held on to the loyalty program. For instance, they could threaten to partner with another casino operator and then allow that rival to use the customer list.
Tepper and other creditors are also suing in Delaware in an attempt to stop the Caesars reorganization.