Caesars Said to Near Deal With Creditor Holdouts; New Rift Seen

(Bloomberg) -- Caesars Entertainment Corp. and bondholders it fought for almost two years have agreed on the framework of a deal to get its operating unit out of bankruptcy, but a new source of resistance may be emerging, according to people familiar with the matter.

The casino giant still faces possible pushback from more senior lenders who are being asked to help fund the deal. Some may refuse to accept the new terms before Friday’s deadline, said the people, who asked not to be identified because the talks are private. 

Until this week, investors who hold more than half of the operating unit’s $5.5 billion in second-lien notes had been the biggest threat to Caesars’s reorganization plans. In a bid to sway them, Caesars offered to increase its contribution to the reorganization by $1.2 billion.

But the new offer, unveiled Wednesday, would require investors who hold the operating unit’s senior bank loans and first-lien bonds to give up “hundreds of millions of dollars” in recoveries. 

The extra cash, debt and stock, coupled with the cut in recoveries for the more senior creditors, would increase the payment to the holdouts by $1.6 billion. 

Apollo Global Management LLC and TPG Capital, which took Caesars private in a 2008 leveraged buyout, would see their stakes reduced, but not eliminated.

The second liens have agreed to support Caesars if the Las Vegas-based company can raise the money to fund the new offer, the people said.

Split Up

The operating unit entered Chapter 11 in January 2015. The current reorganization proposal sees the unit being split into a real estate investment trust to hold the casino properties and an operating company to manage them.

The non-bankrupt parent, Caesars Entertainment Corp., would be combined with Caesars Acquisition Co. Creditors of the bankrupt operating unit would own 62 percent of the new company, according to Wednesday’s statement from the company.

Charles Zehren, a spokesman for Apollo, didn’t immediately return an e-mail seeking comment on the negotiations. Stephen Cohen, a spokesman for Caesars, declined to comment.

The case is In re Caesars Entertainment Operating Co. Inc., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).