Caesars secures bankruptcy plan approval in "monumental achievement"

Caesars Entertainment Corp's main operating unit won court approval on Tuesday for a plan to shed $10 billion of debt and end a contentious $18 billion bankruptcy filed nearly two years ago to the day.

The Caesars unit reached a deal last week to resolve the last objection to its reorganization plan, which will split the business into a real estate investment trust and a separate operating company.

"It is a monumental achievement," U.S. Bankruptcy Judge Benjamin Goldgar said at a hearing in Chicago after approving the reorganization plan.

Goldgar praised the various law firms that worked on the case, led by Kirkland & Ellis LLP as counsel for the debtors.

“It’s really to your credit, it’s a magnificent job,” Goldgar said immediately after signing the deal. “Certainly for the creditors, it’s a magnificent recovery.”

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The proposed plan places the company’s assets into a real estate investment trust consisting of two entities, OpCo and PropCo. PropCo will directly own the properties in the CEOC estate while OpCo is responsible for managing the properties, according to plan documents

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CEOC says a third entity will be created, CPLV, to take possession of Caesars Palace Las Vegas. The plan will be backed by $5 billion in contributions from nondebtor parent Caesars Entertainment Corp. and its private equity sponsors, Apollo Global Management and TPG Capital, both in the form of cash and in promises to underpin billions of dollars of the newly created REIT’s debt, according to plan documents.

In exchange, creditors agreed to drop lawsuits over the parent company’s 2014 decision to disavow guarantees on certain CEOC notes. Junior bondholders say disavowing the note guarantees was an attempt to minimize creditor recoveries to the benefit of Apollo and TPG, which scooped up the Caesars empire for $30 billion in 2008.

Creditors will also be prohibited from pursuing potential legal claims related to pre-bankruptcy asset transfers that an independent bankruptcy examiner in March 2016 said could cost the parent company between $3.6 billion and $5.1 billion in constructive and actual fraud claims.

The U.S. Trustee objected to the liability waiver late last year, arguing that the release was too broad and amounted to a “blanket immunity” for directors and executives who aren’t contributing to help CEOC out of bankruptcy.

The objection was settled at the eleventh hour, however, with parties appearing before Judge Goldgar on Friday to tell him they have struck a deal that amends the plan to assuage the trustee’s concerns.

CEOC filed for bankruptcy in Illinois in January 2015, three days after junior creditors attempted to force the company’s hand by filing an involuntary bankruptcy petition in Delaware. T

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he company came into Judge Goldgar’s court with $18 billion in debt, $10 billion of which it hoped to offload through a reorganization plan already agreed to by senior lenders and bondholders

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But junior bondholders fought against the proposed reorganization and it took four attempts before CEOC drew a plan that brought all creditor groups on board, winning the support of all of its major creditor groups in September.

The plan still needs financing, approvals from gaming regulators and to meet other milestones before it becomes effective, likely no earlier than June 2017, Kirkland & Ellis’ Joe Graham said in court Tuesday.

After that date, Caesars CEO Mark Frissora said that the “new Caesars will be a stronger company with a healthy balance sheet, a plan for growth and investment, operating discipline and a relentless focus on employee and customer satisfaction.”

“While there is still much work ahead to complete this process, we are excited about the future of the Caesars enterprise,” Frissora said in a Tuesday statement.

CEOC is represented by David Seligman, David Zott, Jeffrey Zeiger, James Sprayregen, Paul Basta, Joe Graham and Nicole Greenblatt of Kirkland & Ellis LLP.

The bankruptcy is In re: Caesars Entertainment Operating Co. Inc. et al., case number 1:15-bk-01145, in the U.S. Bankruptcy Court for the Northern District of Illinois.

Shares in Caesars, which rose on Friday following the settlement, were unchanged at $8.95 at midday on Tuesday.