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Must-know: Caesars Merges And Restructures Amid Bankruptcy Plans

Shawn Bolton

Caesars Entertainment Merges And Restructures Amid Bankruptcy Plans (Part 1 of 6)

CEOC restructures

On December 28, 2014, Caesars Entertainment’s (CZR) entered into an agreement with the first lien bondholders of Caesars Entertainment Operating Company (or CEOC), a majority-owned subsidiary of CZR, to restructure CEOC’s debt. These bondholders represent over 39% of claims in respect of CEOC’s:

  • 25% senior secured notes due 2017
  • 5% senior secured notes due 2020
  • 9% senior secured notes due 2020

According to an SEC filing, on December 19, 2014, CZR announced a bankruptcy plan that will restructure and reduce CEOC’s debt to $8.6 billion from its current $18.4 billion. As per the filing, CZR needs approval from 60% of its first-lien debt holders by January 9, 2015, for the restructuring to become effective.

CZR was weighed down with debt when it went private in 2008 due to TPG Capital and Apollo Global Management (APO) in a leverage buyout deal valued at $30.7 billion.

Merger to help restructuring

On December 22, 2014, CZR and Caesars Acquisition Company (CACQ) entered into a definitive agreement to merge in an all-stock transaction. This merger should support the proposed restructuring of CEOC to reduce debt and lower interest payments. The successful completion of the merger should position the merged company to support the restructuring of CEOC without the need for any significant outside financing.

The above chart shows that both the merger and the restructure announcements have had a positive impact on CZR’s share price. Investors who want to avoid the risk of investing in a single casino stock may invest in the casino industry through ETFs like the Market Vectors Gaming (BJK) and Consumer Discretionary Select Sector SPDR Fund (XLY).

In this series, we’ll take a look at the new capital structure of Caesars’s restructured unit, Caesars’s debt holders’ recovery, the proposed ownership of the merged entity, and the new corporate structure of Caesars.

Continue to Part 2

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