Bankrupt Caesars Casino Unit Increases Debt Settlement Offer by $1.6 Billion

by San Antonio Attorney

Struggling LA casino unit Caesars Entertainment Operating Co Inc. (CEOC) hopes to exit bankruptcy via a new settlement offer that provides an additional $1.6 billion to its creditors.

Last Wednesday’s pronouncement came exactly a week after the judge in charge of the bankruptcy case instructed Caesars’ major investors Marc Rowan of Apollo Global Management (APO.N) and David Bonderman of TPG Capital Management to reveal the full value of their wealth to all junior creditors to prove that they both have the money necessary to fund CEOC’s reorganization.  According to the judge, issuing a full disclosure of their assets helps clear both Rowan and Bonderman from accusations of fraud.

Under the new proposal, CEOC, including its parent companies and senior management officials, will put in $1.2 billion to fund the settlement, while the rest of the amount will be sourced from decreasing the payouts given to first-lien banks and bondholder creditors.  It is expected that Apollo and TPG will shoulder majority of the costs by handing over their stocks in CEOC, valued to be around $954 million.  This new settlement will be in addition to the $ 4 billion previously offered by the company to its creditors.

Despite the company’s optimism, many observers remain wary about the future of the deal.

Caesars’ and its creditors have long locked horns about the total amount of money that Apollo and TPG need to settle in exchange for releasing claims.  In fact, junior creditors still have ongoing claims totaling $12.6 billion in Delaware and New York courts.

According to creditors, CEOC’s parent companies Apollo and TPG were responsible for the casino’s eventual decline, and were actually filing bankruptcy to evade a total debt of $18 billion.  Industry insiders also say that CEOC’s parent companies face paying up to $5 million in damages for shady deals that occurred prior to the casino’s bankruptcy.

Creditors were given until Friday to indicate their agreement to the deal.

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