Main Caesars unit plans bankrupcty filing

The main unit of Caesars Entertainment is preparing to file for Chapter 11 bankruptcy protection in mid-January, the casino company said on Friday, as it reached agreement with some senior creditors on the terms of a debt restructuring.

The plan, approved with senior bond holders, will wipe out more than half of the of the $18.4bn of debt on the balance sheet of Caesars Entertainment Operating Co, imposing significant losses on more junior creditors.

The planned filing will affect 44 casinos and resorts under the Caesars, Harrah's and Horseshoe brands, across the US and in five other countries.

Caesars failed to reach agreement with senior holders of its bank debt, however, which means that the bankruptcy could be a messy and drawn out process in which value ebbs away. Holders of the bank debt remains at odds with Caesars' owners, and among themselves.

If other creditors sign off on the deal the company announced in a securities filing late on Friday, the most senior lenders will receive 100 cents on the dollar, but not all in cash. Senior bondholders will get about 93 cents on the dollar while holders of second lien debt will receive far less than its face value.

Caesars plans to restructure Caesars Entertainment Operating Co into an operating entity and a real estate investment trust to hold its US properties. Equity in that new unit will be offered to the more junior second lien debt holders if they agree to the deal. As a sweetener, the parent company is putting up more than $1bn in cash and guarantees.

Caesars missed part of a $225m payment it owed junior creditors earlier this month, triggering a dispute among creditors. Some of these, including Elliott Management, had bought credit insurance on which they will earn significant profits from a default or bankruptcy filing. Elliott was among the senior creditors that approved Friday's plan.

Other creditors had doubled down on their exposure to Caesars, however, by selling such insurance. Those creditors are resisting a filing in the near term and sparring over what constitutes an "event of default". The company is now in a 30 day grace period on the interest it owes.

Apollo Global Management and TPG bought Caesars for about $30bn just as the buyout boom was coming to an end, completing the deal in January 2008. Caesars soon began to struggle with the debt its owners put on its balance sheet as a weak US economy hit consumers' appetite for gambling and their disposable income.

The group's hotels and casinos, including the flagship Caesars Palace in Las Vegas, never saw their business fully recover.

A bankruptcy filing has long been seen as only a matter of time, as the company continued to bleed. Caesars warned in November that it would run out of cash before the end of 2015.

At a time when low interest rates have meant that defaults have plummeted, all the major investors in distressed debt had piled into Caesars, in a battle that was unusually nasty, even by the standards of that hardball world.

Caesars and Texas utilityEnergy Future Holdings were among the largest "take private" deals of the boom years. At the time, they reflected the growing clout of buyout firms that could target even a near $50bn company, using borrowed money. Instead, they soon became a symbol of private equity hubris and many of the buyouts from the peak years are still struggling six and seven years later.

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