Caesars unit eyes cash use, petitioning creditors secure stay of case

By Caroline Salls

Pittsburgh, Jan. 15 – Caesars Entertainment Corp. subsidiary Caesars Entertainment Operating Co., Inc. (CEOC) filed Chapter 11 bankruptcy on Thursday in the U.S. Bankruptcy Court for the Northern District of Illinois to implement its financial restructuring plan.

Caesars Entertainment, Caesars Entertainment Resort Properties and Caesars Growth Partners, which are separate entities with independent capital structures, did not file bankruptcy, according to a company news release.

As previously reported, three CEOC 10% second-lien noteholders filed an involuntary bankruptcy petition against the company on Jan. 12.

On Wednesday, the petitioning creditors asked the U.S. Bankruptcy Court for the District of Delaware, in which the involuntary case was filed, to order a stay of all parallel bankruptcy proceedings.

That motion, along with a request to establish venue for the Chapter 11 proceedings, was denied, with the court saying it would not grant an emergency hearing when the voluntary case had not yet been filed.

However, the Delaware court granted the parallel proceedings stay request on Thursday, pending its order determining the venue in which the Chapter 11 case will proceed.

The stay order does allow CEOC to be heard in the Illinois case on most of its first-day motions, including motions related to use of cash collateral, maintaining customer programs and payment of taxes, vendors and employee wages and benefits. The company cannot be heard on a first-day motion related to case management procedures, the order said.

An informal group of 10¾% guaranteed noteholders and the indenture trustee for CEOC’s 10% second-priority senior secured notes due 2018 filed joinders to the petitioning creditors’ stay request.

Cash collateral motion

According to the news release, CEOC filed various customary first-day motions in the its voluntary Chapter 11 case in support of its financial restructuring. CEOC said it intends to pay suppliers in full under normal terms for goods and services provided on or after the filing date.

Among the first-day motions was a request to use the cash collateral of the company’s pre-bankruptcy secured creditors to fund its operations while in bankruptcy.

Absent the use of cash collateral, CEOC said the debtors will be unable to pay their thousands of employees, fund working capital, pay their taxes, maintain their insurance policies, continue their cash management system, make capital expenditures or pay the administrative costs throughout the Chapter 11 cases.

The company’s access to cash collateral under an interim court order will terminate on March 3 if the final order has not been entered.

In addition, the cash collateral agreement sets deadlines of first-lien credit parties and first-lien noteholder parties under which a plan of reorganization and related disclosure statement must be filed within 90 days.

According to an 8-K filed with the Securities and Exchange Commission, CEOC extended the period during which it is seeking consents from lenders to support the restructuring to 5 p.m. ET on Jan. 26 from 9 p.m. ET on Jan. 14.

Debt details

In its bankruptcy petition, CEOC said it had $12,350,100,000 in total assets and $19,868,900,000 of total debt as of Sept. 30.

The company’s largest unsecured creditors are

• Law Debenture Trust Co. of New York, with a $530 million unsecured notes claim;

• Clark County, Nev., with a $46.9 million special improvement bonds claim;

• Iowa Gaming Commission, based in Des Moines, Iowa, with a $42.63 million dog racing exit costs claim;

• IGT, based in Las Vegas, with a $28.54 million trade payable and slot financing claim;

• Hilton Hotels Corp. of McLean, Va., with a $25 million pension plan litigation claim;

• House of Blues of Hollywood, Calif., with a $13.79 million lease claim;

• Board of Levee Commissioners for the Yazoo-Mississippi Delta, based in Clarksdale, Miss., with a $10.54 million lease claim;

• Simon Group of Indianapolis, with a $4.58 million deferred income/signing bonus claim;

• Earl of Sandwich, based in Orlando, Fla., with a $4.5 million lease claim; and

• VISA of Foster City, Calif., with a $3.43 million deferred income/signing bonus claim.

The company said in the 8-K that the bankruptcy filing constitutes an event of default under its credit agreement with Credit Suisse AG, Cayman Islands Branch, under which $5,354,000,000 is outstanding; $2,095,000,000 of 11¼% senior secured notes due 2017; $1.25 billion of 8½% senior secured notes due 2020; $1.5 billion of 9% senior secured notes due 2020; $750 million of 12¾% second-priority senior secured notes due 2018; $4 million of 10% second-priority senior secured notes due 2015; $3.68 billion of 10% second-priority senior secured notes due 2018; $479 million of 10¾% senior notes due 2016; $297 million of 6½% senior notes due 2016; and $233 million of 5¾% senior notes due 2017.

However, any efforts to enforce default-related payment obligations are automatically stayed as a result of the bankruptcy filing.

Notes trustee resigns

On Tuesday, the company entered into an instrument of resignation, appointment and acceptance with resigning 12¾% second-priority senior secured notes trustee Wilmington Saving Fund Society, FSB and successor trustee BOKF, NA.

Under the instrument, Wilmington assigned all rights to the trust created by the notes indenture to BOKF, and CEOC accepted Wilmington’s resignation.

Caesars is a Las Vegas-based casino-entertainment company. The Chapter 11 case number is 15-01145.

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