Caesars Regains Footing in Atlantic City with Approval of Debt Restructuring Plan
Posted on: May 12, 2017, 11:00h.
Last updated on: May 12, 2017, 12:47h.
The New Jersey Casino Control Commission (CCC) has approved a plan by Caesars to restructure its debt by outsourcing casino operations in two of its three Atlantic City resort properties.
Under the arrangement, the Caesars Entertainment Operating Company will essentially split its resorts into two units. Day-to-day operations of the Caesars and Bally’s casino resorts in Atlantic City will be run by a newly formed management company, while the properties will still be owned by Caesars, through the company’s real estate investment trust.
The restructuring is part of Caesars’ emergence from Chapter 11 bankruptcy. The real estate group will lease the properties to a casino management firm, though both will legally still be under the same corporate umbrella.
“It is my hope that when the reorganization process is complete, Caesars and Bally’s will be able to focus on growing their business just like other operators in New Jersey,” CCC Chairman Matthew Levinson explained. “After a decade of decline, Atlantic City’s casino industry is turning around.”
Harrah’s, Caesars’ third and only other property in Atlantic City, won’t be impacted by the reorganization.
Should Revel Owner Be Miffed?
The CCC’s decision to approve Caesars’ restructuring might receive harsh criticism from TEN owner Glenn Straub. The Florida-based real estate developer purchased the shuttered $2.4 billion Revel in April of 2015 for the deeply discounted price of $82 million.
Over the last two years, however, Straub has engaged in a bitter war with local and state officials. He’s repeatedly tried to reopen the resort, but has continually encountered regulatory obstacles.
“Instead of creating roadblock after roadblock, the agency should be doing everything in its power to facilitate getting this casino opened,” Straub attorney David Stefankiewicz said in April.
In Straub’s latest beef with Atlantic City, he contends he shouldn’t have to obtain a casino permit from the New Jersey Division of Gaming Enforcement (DGE), because he plans on leasing the gaming floor to a third-party operator that is already licensed.
In CCC’s approval this week for Caesars, it seems to do allowing the casino corporation to do what they have not allowed for Straub. The two Boardwalk properties will be owned by a trust that leases the resorts’ gaming back to Caesars’ licensed division. The trust, however, will be created without a permit from the DGE, perhaps because Caesars executives have already undergone heavy vetting to receive licenses.
Levinson explained that while the real estate group within Caesars won’t need to obtain a full casino license, it will be required to receive a Casino Service Industry License.
It’s been more than two years since Caesars first filed for Chapter 11 bankruptcy protection in January 2015 and spit its assets from its liabilities. CEOC assumed upwards of $18 billion in debt, while Caesars Entertainment Corp moved forward with strong performing holdings.
There’s Caesars Entertainment Corporation, Caesars Entertainment Operating Company, Caesars Entertainment Resort Properties, Caesars Interactive Entertainment, Caesars Growth Partners, Caesars Acquisition Company, and perhaps others we couldn’t dig up, that all played a role in the complex bankruptcy proceedings.
Debt collectors unsuccessfully challenged Caesars’ actions in court. Fast-forward nearly 30 months, and the parent company is emerging from fiscal ruin and regaining some semblance of stability.
Caesars Entertainment Corporation, traded on NASDAQ, is currently at about $11 per share. That’s up nearly 130 percent from mid-July 2015 when lawsuits related to Caesars’ bankruptcy began and, with the stock price wallowing below $5, CEO Mark Frissora took the casino behemoth’s helm.