Debt Restructuring Agreement - Report on Caesars Entertainment

Jul 27, 2015, 09:15 ET from

NEW YORK, July 27, 2015 /PRNewswire/ --

ACI Association has initiated research coverage on Caesars Entertainment Corporation (NASDAQ: CZR). Select highlights from the internally released reports are being made available to the general public (included below), with access to the entirety of the research available to new members.

Today, membership is open to readers on a complementary basis at the following URL:

Highlights from our CZR Report include:

  • Debt Restructuring Agreement - On July 20, 2015, Caesars Entertainment Corporation and its subsidiary, Caesars Entertainment Operating Company, Inc. (CEOC), entered into a restructuring agreement with holders of a significant amount of CEOC's second-lien notes. This agreement is consistent with the Restructuring Support Agreement (RSA) announced on January 14, 2015, under which CEOC voluntarily commenced a Chapter 11 reorganization. Under the RSA, CEOC will separate its US-based gaming operating assets and real property assets into two companies: an operating entity (OpCo) and a newly formed, publicly traded REIT that will own a newly formed property company (PropCo).
  • Highlights of the Agreement - According to the agreement, second lien noteholders who sign the agreement by the date holders owning greater than 50% of second lien debt sign the agreement, (or 10 days after such date if occurring before August 19, 2015), shall receive a forbearance fee. In addition, holders eligible to receive the fee will receive their pro rata share of at least $200 million in convertible notes to be issued by Caesars Entertainment in consideration for forbearing in respect to certain alleged defaults. Further, these holders might also receive an additional $200 million of convertible notes either directly or through an enhanced class recovery.
  • Improvements from the Previous Agreement - Caesars Entertainment and CEOC have also agreed to several improvements from the January 14, 2015 RSA. The Company stated that it will contribute an additional $200 million of Caesars Entertainment convertible notes to the class of second lien noteholders if the class votes in favor of CEOC's plan of organization. However, if they don't, then the additional notes shall be distributed to second lien noteholders who have signed the agreement as an additional fee. Additionally, the Company will grant c. 5% common equity stake in PropCo (or cash) to the class of second lien noteholders and an additional c. 5% common equity stake in PropCo or cash to the class of second lien noteholders if the class votes in favor of CEOC's plan of reorganization. Whereas, if the class does not vote in favor, the additional equity or cash shall be distributed to second lien noteholders who have signed the agreement as an additional fee.
  • Benefits from the Agreement - As per the release, the transaction will result in reduction of CEOC's debt by around $10 million, providing for the exchange of approximately $18.4 billion of outstanding debt for $8.6 billion of new debt. Moreover, the annual interest expenses will decline by around 75%, to $450 million from approximately $1.7 billion.

To find out how this influences our rating on Caesars Entertainment Corporation read the full report in its entirety here:

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