[Wilmington, DELAWARE] The operating unit of casino company Caesars Entertainment Corp unveiled its plan to cut US$10 billion of debt and to exit Chapter 11 in a late Monday filing with a US Bankruptcy Court.
The plan formalised a proposal negotiated with senior creditors prior to the casino operator's January bankruptcy filing. It must be approved by US Bankruptcy Judge Benjamin Goldgar in Chicago and creditors, a process that can easily take a year.
Under the proposed plan, the bankrupt unit would be split into an operating company that runs 38 casinos in 14 states and a property company. "The debtors believe this structure materially improves stakeholder recoveries versus a more traditional 'standalone'restructuring," the company said in a court filing.
The plan was filed on Monday when the parent company Caesars Entertainment reported its fourth-quarter net loss narrowed to US$1 billion from US$1.76 billion a year earlier. Shares of the parent company closed down 4 per cent at US$10.58 on Nasdaq.
The property company would be controlled by a real estate investment trust, which benefits from more favorable tax treatment, creating value for the creditors.
In exchange for their US$6.3 billion of debt, the first-lien noteholders would own the operating company when it exits bankruptcy. The noteholders would also own about 70 per cent of the property company, with junior creditors getting the rest in exchange for their US$5.2 billion in debt.
The bankruptcy put on hold lawsuits launched by other creditors who alleged the parent company looted the operating unit of its best casinos and properties and left it without enough assets to pay its debts.
The parent company has said the property transfers were fair.
On Tuesday, a trustee for US$750 million of junior notes sued the parent company in Manhattan federal court, seeking to enforce the parent's guarantee of the notes and seeking full repayment plus damages. In January, the court declined to dismiss at an early stage a similar lawsuit.
A Caesars spokesman did not immediately respond to a request for comment. The parent company has said it has strong defences to claims that it improperly eliminated the guarantees and has said it did not expect the allegations to impact the operating unit's reorganization.
The parent company is controlled by Apollo Global Management and TPG Capital, private equity firms that led the US$30.7 billion leveraged buyout of Harrah's Entertainment in 2008.