Caesars Entertainment Operating Company, Inc. (CEOC), known to be the main operating unit of Las Vegas-based gambling operator Caesars Entertainment Corp., filed for Chapter 11 bankruptcy protection on January 15, 2015. Since then, and even prior to that, the company has been locked into numerous legal battles with creditors and other involved parties, has been facing serious financial penalties, and has been looking for ways to recover from its current situation and improve profitability.
CEOC’s decision to file for Chapter 11 bankruptcy was considered the best the company could do in order to settle issues arising from its $18-billion debt, which mainly stemed from the $30.7-billion leveraged Apollo Global Management and TPG Capital buyout that occurred in 2008. What is more, the gambling operator saw key performance indicators drop due to an overall gambling decline and that unleashed waves of unpleasant occurrences for CEOC.
CEOC’s Chapter 11 filing was supported by the company’s first-lien noteholders as the move was considered a necessary one for the reduction of their long-term debt and annual interest payments.
One of the first things that needed to be settled in Caesars’ $18-billion bankruptcy case was where it would be heard. On January 12, only three days before the gambling company filed for Chapter 11 bankruptcy protection, certain lower-ranking noteholders filed a petition against CEOC in a Delaware-based court. And the major gambling operator filed its case in Chicago.
People with knowledge of the matter clarified that the choice of venue was particularly important as it would likely influence the whole course of the case. Generally speaking, Illinois federal courts seem to be somewhat less strict in their decision as to whether a struggling business entity should be released from bankruptcy liability.
Towards the end of January, it was decided that the case should be heard in Illinois and Judge Benjamin Goldgar took charge of the Caesars-related legal proceedings. In March, the judge appointed an independent prosecutor to investigate the transactions CEOC had previously made. According to Caesars’ creditors, the gambling company and its main operating unit had shifted various assets away from them in order to benefit owners.
In April, CEOC asked for a deadline extension to present a reorganization plan. The company had until May 15 to file the said plan, but it wanted to extend its deadline to November. It wanted to prepare an efficient strategy that would help it slash its debt and eventually avoid declaring insolvency.
It was early in October when CEOC filed an amended restructuring plan as well as a disclosure statement, requesting to have its exclusive right to propose a complete version of the plan extended to March 15, 2016. The amended plan was backed by 80% of the company’s first-lien noteholders and called for reorganization and recoveries for CEOC’s junior creditors.
Under the plan, Caesars’ main operating unit would be split into a subsidiary company that would be in charge of all casino properties, and a real-estate investment trust. What is more, if approved, CEOC’s restructuring would result in the operator cutting its long-standing debt by more than a half. The essence of the plan was that it would turn CEOC into a tax-efficient entity and would reorganize its corporate balance sheet.
Despite all the issues the company has been facing over the past year, it has repeatedly pointed out that its casino operations would not be affected and its gambling venues would continue working as normal. In October, Caesars also said that its performance in the first half of 2015 improved, despite all the setbacks and legal hurdles.
And it was in October again when the major gambling operator told media that it would launch the $75-million transformation of its emblematic Roman Tower at Las Vegas’ Caesars Palace in January. The tower is to be renamed Julius Tower and once completed, it would feature 587 completely renovated rooms, designed to offer guests modern yet classical atmosphere. In August 2016, Caesars’ most popular property will celebrate its 50th anniversary.
Apart from having to deal with its reorganization, CEOC and Caesars as a whole also faced several serious financial penalties in 2015. The gambling company was imposed an overall fine of $9.5 million by the Financial Crimes Enforcement Network and the state of Nevada for poor anti-money laundering controls at Caesars Palace.
FinCEN, a Department of Treasury agency, said in a September statement that the gambling venue’s anti-money laundering monitoring was “severely deficient,” particularly at its VIP rooms. Those rooms are known to be preferred by wealthy Chinese players and Caesars revealed that they were allowed to play anonymously at its emblematic casino.
FinCEN also claimed that the gambling giant was not particularly comprehensive when monitoring international transactions at the offices that were in charge of bringing well-to-do cutomers. Due to the lax anti-money laundering controls, the gambling company was fined to pay $8-million to federal authorities. In addition to this, Caesars was also imposed a $1.5-million fine by the Nevada Gaming Control Board for having admitted to all the allegations related to its anti-money laundering policy.
To sum up, it seems that 2016 will be an equally difficult year for the Nevada-based gambling operator. It will have to deal with its financial problems, to present an efficient reorganization plan, and to eventually make piece with its creditors so as to be able to avoid declaring bankruptcy. And given the fact that the gambling market is constantly growing and becoming more and more competitive, Caesars will also have to make sure that its properties are attractive enough to draw gambling customers from all over the world.
