A few days ago, Caesars Entertainment Corp. was given a notice of default because the casino giant failed in making its payments before the deadline agreed. As a matter of fact, that agreement was reached after long restructuring discussions between Caesars’ managers and the creditors.
Bondholders claim that Caesars’ actions contravened the agreements signed. According to them, the violation took place in May when the transfer of Harrah’s New Orleans casino was made. What is more, the bondholders also accused Caesars in violating the rules, concerning a customer rewards program. In addition, Caesars Entertainment Operating Co. was supposed to separate the entities that belong to the company. That is the information, which the filling, submitted to the Securities and Exchange Commission, contained.
The disputable transfer made creditors unable to have a full control over the venue. What made the bondholders even angrier was the fact that they consider the assets transferred to cost much more. As a matter of fact, they mentioned it in the filling and said that the market value of the assets is unfair.
However, Caesars representatives pretend that bondholders’ claims are groundless. They also added that they are convinced that there have not been a default as well.
Actually, Caesars has been involved in this kind of troubles for a long time. The default notice was intended to serve as an attack. It was not the first one and most probably will not be the last. Creditors’ intention was just to bring Caesars down by causing issues with the transfer that took place in May.
Three months ago, another group of bondholders took Caesars to court. According to their claims, company has used illegal means with the aim of moving some of its assets out of creditors’ reach.
The default notice came at a really inconvenient time though. Caesars representatives and senior creditors are trying to reach an agreement, concerning the conversion of Caesars Entertainment Operating and deal with the giant debt of the company, that is equal to more than $18 billion up to now.
According to the plan, established by the managers of Caesars Entertainment Operating Co, the company will be divided into clusters – a REIT and a company that will be in charge of managing the properties of REIT.
Those, who keep themselves informed about every stage of the talks between Caesars and its creditors, know that discussions have not been finished yet. Noteholders and lenders are still talking over all possible alternatives for solving the complicated issue.
Factors that have led to the pessimistic situation are too many but some of the main reasons for the heavy debt are the economic crisis and the fact that Atlantic City’s and Caesars casinos did not asked for any help from Macau.
