Mid-January 2015 will see Caesars Palace restructuring after filing for Chapter 11 bankruptcy.
After years of losses, Caesars has finally reached a viable solution with creditors over its efforts to restructure its operations.Come the middle of next month,Caesars Entertainment Operating Co (CEOC) will file for Chapter 11 bankruptcy protection.
This decision came after a deal was reached with all members of the first lien note-holder steering committee last Friday. The subsidiary, which is the main operating unit of Caesars Entertainment Corporation, includes the land-based and mobile casino gambling Harrah site situated in Atlantic City.
As hundreds of millions of dollars were being lost, the bankruptcy protection system will help to decrease the CEOC’s debt to $8.6 billion. Caesars’s debt amount is currently estimated at over $18.4 billion and the company did not wish to pay $225 million in bond interest payment thus ‘triggering a default on its debt’.
Property company to keep shareholders content
With this pre-packaged bankruptcy deal, the two newly-created capitalized companies will improve cash flow generation and will not be included in the Chapter 11 deal. Indeed, the Chapter 11 clause will give its private equity owners an opportunity to continue to make an operating profit by giving them ownership of the 2 new companies.
The two newly formed companies consist of an operating entity and a publicly-traded real estate investment trust (REIT). The way in which the planned restructuring of CEOC was carried out was seen as the best solution that accommodated the best interests of all the stakeholders of the company.
CEOC’s chairman, Gary Loveman, said that filing for Chapter 11 enabled the establishment of “a strong and sustainable capital structure for CEOC and maximize value for our stakeholders”. The chairman thanked the creditor group for supporting the initiative.
Ceasars expressed its desire to keep on welcoming guests. Loveman assured the public that it would be business as usual for operations on all properties.The company also said that the Total Rewards program would go on and this ‘throughout the balance sheet restructuring process’.
The bankruptcy agreement, approved under US gambling laws, will see Caesars’ yearly annual interest expense decreased by approximately 75%, from about $1.7 billion to around $450 million. With the publicly-traded REIT CEOC can reduce its leverage effectively.