Caesars is close to emerging from bankruptcy, pending a trial to be held this month.
Owners Apollo Management and Texas Pacific Group will relinquish $950 million in equity in Caesars Entertainment Operating Group (CEOC), although they will continue to control parent company Caesars proper. CEOC will revert to a real estate trust. Since REITs must pay over 90% of their pre-tax income to shareholders, creditors stand to recoup their indebtedness from Caesars faster this way than by waiting for CEOC to pay them off.
At least that’s how it’s supposed to play out. The U.S. Bankruptcy Trustee has lodged an objection to the plan, which it deemed "blanket immunity" for corporate misdeeds.
This perplexed presiding Judge Benjamin Goldgar, who noted that the once-dissident creditors were okay with the arrangement, so why should the trustee intervene? Caesars already dodged a multimillion-dollar bullet when creditors refrained from suing after a court-appointed investigator found billions in fraudulent transfers, made when CEOC split off from Caesars. (For one, it "sold" Total Rewards to Caesars for the princely sum of $0.)
With 90% of CEOC’s creditors having given their approval to the bankruptcy-exit plan, the January trial is expected to proceed smoothly, barring the objections of the bankruptcy trustee. As for the junior creditors, they're feeling much happier after their share of the settlement was upped $5 billion, to be financed mostly by the $4.4 billion sale of online unit Playtika.
Although Caesars didn’t conduct a fire sale of its properties, it enters 2017 as a somewhat chastened company. It kept its Las Vegas Strip portfolio (although a series of fires and malfunctions at The Rio provided an inauspicious start to the new year), though it did cede ground elsewhere.
Harrah’s Tunica, in Mississippi, was closed and its gambling barge scrapped.
A construction project in Biloxi was abandoned.
In Ohio, CEOC sold its 20% ownership in two casinos and a racetrack.
And in Atlantic City, the company closed its Showboat Hotel-Casino (now operating strictly as a hotel under new ownership). Also on the Boardwalk, Bally’s Wild Wild West is perpetually rumored for closure.
So there was no fire sale, but CEOC will emerge from bankruptcy a slightly smaller company. Did they learn their lesson? Time will tell.
