Kevin Dowd September 28, 2016
The long-running Caesars Entertainment saga has taken a crucial step toward resolution, as the casino operator and its creditors have reached an agreement that will allow the company's main operating unit to emerge from Chapter 11 bankruptcy. The plan calls for TPG and Apollo Global Management—private equity backers of Caesars since a $27.8 billion buyout of what was then called Harrah's Entertainment in 2008, a debt-plagued deal that went south after the start of the financial crisis—to contribute the full 14% equity stake they would have owned in Caesars Entertainment Corporation (NASDAQ: CDZ), the parent company of the indebted Caesars Entertainment Operating Corporation, toward the affiliate’s reorganization.
That equity slice is worth about $950 million and will lead to CEOC’s second-lien noteholders receiving $0.66 on the dollar for their junior debt, a significant uptick over previously discussed agreements. In exchange for that increase, TPG and Apollo will be released from all pending and potential litigation related to the Caesars Entertainment—likely a major motivation for the deal. Junior creditors led by Appaloosa Management have long alleged impropriety in the firms' ownership, engaging in legal action that eventually embroiled the personal assets of both Apollo co-founder Marc Rowan and TPG co-founder David Bonderman.
Sound complicated? That’s what happens when the private equity industry, gambling, and $28 billion all cross paths. To provide a better picture of how we got to this point, we compiled a timeline of the decade-long relationship between Caesars, TPG and Apollo:
December 2006: Apollo and TPG agree to buy Harrah’s Entertainment (NYSE: HET) in a deal valued at about $27.8 billion, including the assumption of $10.7 billion in debt
January 2008: Apollo and TPG complete their acquisition, funded by $6 billion in cash and $22 billion in debt
November 2010: Harrah’s cancels a planned IPO and officially changes its name to Caesars Entertainment
February 2012: Caesars raises about $16 million in its IPO, selling less than 2% of the company in the offering
October 2013: Caesars transfers ownership of four hotels from CEOC to other Caesars entities
May 2014: Caesars transfers ownership of four more hotels, including three in Las Vegas, to its subsidiaries
August 2014: Caesars and its creditors file lawsuits against each other, alleging (respectively) that creditors were seeking to force a default and that Caesars’ recent asset transfers were fraudulent
January 2015: Caesars' CEOC unit files for Chapter 11 bankruptcy as part of a plan to reduce debt by roughly $10 billion
October 2015: Caesars offers to contribute an estimated $1.5 billion toward a restructuring
May 2016: Caesars ups its offer to $4 billion to help CEOC escape Chapter 11
September 14, 2016: A judge rules Apollo and TPG directors must hand over details of their personal wealth to creditors
September 27, 2016: A $5 billion reorganization deal is reached that will allow CEOC to emerge from bankruptcy