Caesars Entertainment Corp. is getting closer to a deal to finance the reorganization of its bankrupt operating unit and end two years of rancorous court battles that embroiled the casino giant and its controlling shareholders, Apollo Global Management LLC and TPG Capital.
Caesars Entertainment Operating Co.’s bondholders and lenders are hammering out the framework of a deal as a midnight deadline looms, according to people with knowledge of the matter. They must determine how to divide a $400 million payout called for in a new plan the casino operator offered two days ago to get holdout second-priority creditors on board with a restructuring, said the people, who asked not to be identified because the talks are private.
A proposal under discussion would require the operating unit’s most senior bondholders and lenders to give up $170 million of their original recoveries, while Caesars provides $200 million, the people said. The unit’s lower-ranking, second-lien bondholders, a group that includes Appaloosa Management, would forgo the remaining $30 million, the people said.
Caesars has given creditors until midnight Friday in New York to sign onto a settlement. No final agreement has been reached yet and the deadline could be extended, the people said.
Stephen Cohen, a Caesars spokesman, declined to comment on the talks, as did Eric Kuo, an Apollo spokesman, and Luke Barrett at TPG. Jonathan Gasthalter, a spokesman for Appaloosa, didn’t immediately comment.
Until this week, the second-lien bondholders had proven the toughest holdouts in the bankruptcy, which began in January 2015. The proposal unveiled Sept. 21 would increase their payout by about $1.6 billion. Approximately $1.2 billion of that would come from the non-bankrupt Caesars parent in the form of cash and stock, while more-senior creditors, including lenders and first-lien bondholders, were called upon to give up some of the more than $11.7 billion they were set to recover.
Las Vegas-based Caesars had originally offered about $4 billion toward the reorganization, but the second-lien bondholders held out for more, saying the company had improperly shifted valuable assets out of the operating unit before putting it into bankruptcy. As leverage, they were pursuing lawsuits in New York and Delaware that accused the parent of violating bond agreements and abandoning promises to back the operating unit’s obligations.
Caesars has said it did nothing improper and its actions were honest attempts to reorganize the heavily indebted unit.
Apollo and TPG, which led a $30 billion leveraged buyout of the casino company in 2008, were also targeted by the second-lien bondholders, who demanded that the private equity firms contribute to creditor recoveries. Under the proposal spelled out Sept. 21, the firms would still retain equity in the reorganized Caesars, but not as much as had originally been planned.