Caesars Entertainment Reveals Major Restructuring Plan

Brett C. - January 3, 2015

Industry Insights

Caesars Entertainment Corporation announced plans to restructure after its acquisition of the affiliate Caesars Acquisition Corporation.

On Monday, December 29^th, Caesars Entertainment Corp. revealed the details of its restructuring plans after it agreed to acquire the affiliate Caesars Acquisition Co. earlier this month. This stock-for-stock merger will put the largest unit’s $18.4 billion debt load in a better financial position.

Restructuring Plan

Caesars Entertainment Operating Co. which owns, manages or operates 44 casinos, is going to be restructured as a property company and an operating company. This new restructured company will be controlled and owned by a real-estate investment trust.

Earlier in December 2014, the Wall Street Journal reported that the Caesars operating company, along with its creditors, were in talks to secure a plan for Chapter 11 bankruptcy protection by the middle of January 2015. In addition, the reorganization of Caesars Entertainment as a real-estate investment trust should also be complete at that time. This restructure includes two different leases, including a single $160 million per year lease for Caesars Palace Las Vegas and a lease for other properties.

Goals of Restructuring

The decision to restructure is the latest effort by Caesars and private-equity backers like TPG Capital LLP and Apollo Global Management LLC to support the finances of the company after the 2008 leveraged buyout of the casino. Hamlet Holdings LLC which is controlled by TPG and Apollo own 66% of Caesars Acquisition. Since the buyout, the company has been involved in capital-market transactions in light of a decrease in gambling and the failure to create a foothold in Macau.

This restructuring deal will unite the stake the parent company has in other properties like Bally’s Las Vegas and Planet Hollywood, online gaming operators and other assets of Caesars Acquisition. This merger also gives Caesars Entertainment the capital it needs to restructure without a significant amount of financing and will increase its value as a lease payments guarantor to REIT, according to the WSJ.