Caesars Entertainment Corp. is taking another step toward bankruptcy. The world’s largest gaming company is buying back an affiliate it established last year in a deal that will help the company pursue a plan to restructure $18.4 billion of debt in bankruptcy court.
Caesars Entertainment will merge with Caesars Acquisition Co. in an all-stock transaction. In a statement announcing the merger Monday, Caesars said the deal will give the combined company $1.7 billion of cash to fund the reorganization it drafted with bondholders.
Caesars said on Friday it would put its biggest unit – Caesars Entertainment Operating Co. – into Chapter 11 proceedings by mid-January. The filing would mark a low point in the history of the Las Vegas-based casino company which was taken private for $30.7 billion by Apollo Global Management and TPG Capital in 2008.
Caesars and other gaming companies have been dealing with slowing growth as the number of casinos in the United States continues to grow. The company, which owns or manages 44 casinos in the United States, also said the deal will allow them to restructure Caesars Entertainment Operating Co. without taking on more debt and further diluting existing shareholders.
The merger is also an admission of failure for Caesars. In March, Caesars sold four properties to Caesars Acquisition for $2.2 billion. Caesars Acquisition was set up as a better capitalized company that could invest in renovations of old properties and new casinos.
For creditors, the merger creates a simpler corporate structure that should make it easier for bondholders, investors and a bankruptcy court judge to understand and value.
“Upon completion of the merger and restructuring, Caesars Entertainment entities will be financially strong, with significant reduced leverage and a much simpler and straightforward corporate structure,” Gary Loveman, chairman and CEO of Caesars Entertainment said in a statement.
The merged company will have a combined market capitalization of $3.2 billion, the company said. Upon completion of the deal, Caesars Entertainment will own 62 percent of the combined company.
Loveman will be chairman and CEO of the merged company. He will oversee the restructuring of Caesars Entertainment Operating Co., the company said.
Loveman said this mergers solidifies the company’s “focus on owning assets in destination and high-growth markets and businesses.” The proposed restructuring of Caesars Entertainment Operating Co. is expected to cut the company’s debt from $18.4 billion to $8.6 billion.
Caesars reported a $908.1 million loss in the third-quarter, compared to a loss of $761.4 million for the same period last year.
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