Caesars Entertainment Corp. is skipping a $225 million interest payment to junior creditors as it continues to negotiate restructuring debt held by its largest unit with more senior lenders, according to a regulatory filing.
The interest payment due on second-tier debt covering its Caesars Entertainment Operating Co. has a 30-day grace period. The interest payments go to holders of almost $4.53 billion of notes.
"If they don't pay in 30-days then they are in default. The creditors can then push the company into bankruptcy," Laura Keller, a corporate finance reporter with Bloomberg News, told KNPR's State of Nevada.
CECO, which has $18.4 billion in debt, is the largest of the Las Vegas-based company’s division and operates Caesars Place on the Strip, as well as properties in Reno, Atlantic City and several regional properties.
Caesars has been trying to reach an agreement with senior creditors with its CECO unit that would restructure the company and would put the unit into Chapter 11 proceedings in Delaware by Jan. 15. The prepackaged bankruptcy will allow CECO to emerge as a real estate investment trust.
Caesars was supposed to pay $41.3 million in interest to holders of 10 percent note due in 2015 and 2018, plus $184 million to a bigger slice of notes due 2018, according to a filing Monday with the Securities and Exchange Commission.
According to the filing, Caesars had $1.5 billion in cash as of Sept. 30. Caesars has a gaming industry high $22.8 billion in debt, which is about $4 billion more than Detroit, which recently emerged from a municipal bankruptcy.
The company is engaged in confidential discussion with first-lien bondholders, according to Bloomberg News. The group includes Elliot Management Corp. Pacific Investment Management Co., and JPMorgan Asset Management Inc., among others.