Updated: Jan. 15 at 2:15 p.m.
The waiting for the latest casino company restructuring is over.
The operating unit of Caesars Entertainment Corp., the largest U.S. casino company, filed for Chapter 11 bankruptcy on Thursday as it tries to get court approval for its plan to reduce its debt by $10 billion.
The Las Vegas-based company said it has the support of its senior noteholders, which will reduce Caesars Entertainment Operating Company Inc.’s debt to $8.6 billion from $18.4 billion. The bankruptcy was filed in U.S. Bankruptcy Court in Chicago.
The company hopes to emerge from bankruptcy later this year. Under the plan, the operating company will be split into a casino company and a publicly traded real estate investment trust.
Much of the gaming company’s debt is a holdover of the $30 billion leveraged buyout of Harrah’s Entertainment that was led by Apollo Global Management LLC and TPG Capital in 2008. The deal ran into trouble almost immediately as the economy entered a deep and long-lasting recession.
Gary Loveman, chairman of CEOC, said the restructuring plan is “intended to strengthen CEOC’s financial condition and significantly reduce debt.”
“The restricting of CEOC is the culmination of a years-long effort to improve the health of (the company’s) balance sheet, which has included substantial investment in new and upgraded assets, especially in Las Vegas,” Loveman said in a statement.
The pre-packaged filing has received support from more than 80 percent of the company’s senior bondholders. The bankruptcy also comes after months of negotiations and financial maneuvers that Caesars Entertainment said were done to free up cash, meet operating expenses and pay down debt.
Creditors opposed to the pre-packaged restructuring have filed multiple lawsuits to block the plan. On Thursday, a bankruptcy judge in Delaware said he would issue a modified stay order that would prevent CEOC from moving ahead with the bankruptcy, the Las Vegas Review Journalreported.
The judge's order would allow Caesars's to seek routine "first-day" orders on an interim basis but not final orders, the Review-Journal reported.
The junior creditors, also known as second-lien bondholders, who own $5.25 billion of debt are expected to recover about 10 percent of what they are owed. Among the junior noteholders of the unit of Caesars Entertainment are Brendeland funds associated with Oaktree Capital and Tennenbaum Capital, according to Bloomberg News.
Caesars operates 40 casinos in 14 states and Canada, including Caesars Palace, Paris, Flamingo and seven other properties on or around the Strip. The gaming company also operates Harrah’s casinos in Lake Tahoe, Reno, and Laughlin.
Caesars Palace is the only Las Vegas property included in CEOC’s bankruptcy filing. The company has more than 30,000 employees, and 45 million members of its Caesars’ Total Rewards customer loyalty program.
“The properties across the entire Caesars Entertainment network are open and will operate without interruption throughout CEOC’s reorganization process,” Loveman said in a statement.
Caesars Entertainment, Caesars Resort Properties and Caesars Growth Partners, which are separate companies with independent capital structures, have not filed for bankruptcy, according to a company statement.
Following Caesars bankruptcy filing, Fitch Ratings downgraded its opinion of the gaming company. In a two-page report, Fitch Ratings said the downgrade reflects CEOC's missed $223 million interest payment in December, the expiration of a 30-day grace period, and the company's voluntary bankruptcy filing.
"Fitch estimates full recoerty for CEOC's credit facility lenders, with 87 percent recovery for the first-line noteholders and less than 10 percent recovery for the remainder of the capital structure," the ratings report said.
Caesars has set up a website, www.ceocrestructuring.com, related to the bankruptcy filing.
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