[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / September 23, 2016 / Active Wall St. blog coverage looks at the headline from Caesars Entertainment Corporation (NASDAQ: CZR) ("CEC") as the company and its affiliates Apollo Global Management, LLC (NYSE: APO) ("Apollo") and TPG Capital, L.P. announced on September 21, 2016 that they are proposing to increase their contributions to $1.6 billion as a part of their restructuring plan for Caesars Entertainment Operating Company, Inc. (CEOC) which has filed for restructuring under Chapter 11 bankruptcy code in January 2015. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
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Best and Final Proposal for Restructuring of the Debt
In a fresh attempt to bring its creditors on board, CEC has offered $1.6 billion for the restructuring of CEOC. Most of this fund would be from Apollo and TPG Capital, which would sign away their equity in CEC in lieu of releasing them from liability related to those creditor lawsuits. This amount also includes CEC's contribution of $954 million in equity and another $92 million of fresh shares of CEC, $100m from Caesars directors and officers, via their insurance companies and $400 million from recoveries by senior creditors who are already on board of the CEOC's restructuring plan. David Seligman, attorney for CEOC told the Illinois Bankruptcy Court that is was the best and final offer and it would be valid only till September 23, 2016.
This decision comes on the wake of US Bankruptcy Judge Benjamin Goldgar's ruling on September 15, 2016, stating that six Caesars directors would have to disclose their personal financial details to junior creditors if they wanted to be released from potential fraud charges and they would first have to prove they can contribute to CEOC's restructuring. The exact details as to how much of their personal finances would be investigated are still not clear.
The Bankruptcy case has been getting complicated since the mediator appointed to resolve the matter between CEOC's creditors and CEC had resigned. The US Judge was particularly peeved with the lack of financial commitment from hedge fund owners of CEC, Apollo and TPG Capital. CEC has been given time till January 2017 to finalize the deal with the creditors; however, the lawsuits could cause delay. CEC has indicated that if it is forced to honour CEOC's $18 billion debts, it would have no option but to follow suit and file for bankruptcy.
Debts, Bankruptcy, and the Haggling with Creditors
CEOC, a subsidiary of CEC, offering casino entertainment services and owns, operates or manages 44 gaming and resort properties in 13 states of the US and in five countries under the Caesars, Harrah's and Horseshoe brand names. CEOC had filed for restructuring of its debts amounting to $18 billion under Chapter 11 of US bankruptcy code in January 2015. Since then CEOC has been making attempts to emerge from the bankruptcy. The group of creditors are pressuring to recover their dues from the parent company CEC and its affiliates - private equity firms Apollo Global Management and Paulson & Co. and TPG Capital. These affiliates owned nearly 50% of CEC.
In December 2014, the first attempt at addressing the handling of debt was made by CEC; wherein CEC would invest billions of dollars by way of cash and equity in CEOC and this would in turn help CEOC pay off its debts. CEC had planned to raise funds by merging Caesars Entertainment with Caesars Acquisitions. Caesars Acquisition owns Planet Hollywood Resort & Casino in Las Vegas and Harrah's New Orleans, among other assets, which were acquired from CEOC before its bankruptcy.
The first lien note-holders and banks have been brought on board and they have agreed to the offer given to them by the company. The matter gets complicated with the bond holders and creditors who hold second lien credit notes valued at $5.5 billion.
CEC had offered to pay $4 billion to these second-lien creditors to pull CEOC out of bankruptcy and release CEC from legal liability. However, these creditors were not in favour of this as they would lose billions. They feel that the parent company had already identified profitable assets for itself before the filing for bankruptcy protection and they are being short-changed. The creditors feel that this amount and the leftover assets of CEOC are not adequate guarantee against their investments. The junior creditors have since then filed lawsuits in Delaware and New York against CEC for fraudulent pre-bankruptcy asset transfers and scrapping of debt guarantees.
Stock Performance
News of the fresh offer boosted the stock of CEC and in the afternoon it soared nearly 30% before coming down a bit. At the closing bell, on Thursday, September 22, 2016, Caesars Entertainment's stock surged 20.74% from its previous closing price of $8.10, ending the trading session at $9.78. A total volume of 5 million shares were traded at the end of the day, which was higher than the 3-month average volume of 987.32 thousand shares. In the last one month and previous six months, shares of the company have advanced 27.68% and 57.23%, respectively. Moreover, the stock gained 23.95% since the start of the year.
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