A few days ago, it was announced that Caesars Entertainment Corporation’s main operating unit is planning to file for Chapter 11 bankruptcy protection in the beginning of 2015. Thus, the gambling operator will be able to reduce its debt by more than a half.
Currently, the company’s debt amounts to $18.4 billion. If the restructuring occurs, it will be slashed to $8.6 billion.
Gary Loveman, chairman of Caesars Entertainment Operating Co., said in a special statement on the matter that the restructuring of the operator will allow the managing team to create “a strong and sustainable capital structure for CEOC and maximize value for [the] stakeholders.”
Mr. Loveman stated that the operations of all the company’s properties will remain unchanged. However, other entities, such as Caesars Entertainment Resort Properties, Caesars Growth Partners, and Caesars Entertainment, will not be supervised by the court.
As it was announced, the gaming operator is planning to split its assets that are based on the territory of the USA into two separate companies – the one being a subsidiary entity and the other a real estate investment trust.
Due to this, the annual interest expense is expected to be reduced by 75% to $450 million. Caesars Entertainment will pay about $1.45 billion to the subsidiary company for the planned reconstruction.
Mr. Loveman stated that he considers the REIT structure extremely efficient. According to him, it will certainly help the company recover from its current state. He also pointed to the fact that due to the REIT, which is publicly traded, Caesars Entertainment Operating Co. will be able to considerably reduce its leverage.
Currently, Caesars owes a total of $22.8 billion in debt and it dates back to 2008 when the operator was sold to TPG Capital and Apollo Global Management in a leverage buyout. The company has been trying to restructure its debt since September. In November, two creditors withdrew from the discussions on the matter and another one followed them last week.
The agreement for the restructuring, that was announced last Friday, was signed by all the representatives of the casino operator’s first-lien noteholder steering committee.
Caesars shares dropped by 1% since November 13, when the restructuring plan was introduced. They were valued at $1.9 billion on the Nasdaq at the end of last week.
Currently, Caesars Entertainment Operating Co. manages about forty different properties in fourteen U.S. states as well as Ontario, Canada. The company operates ten hotel and casino venues on the Las Vegas Strip or near it.
