Missing a payment on a loan is a big deal for most of us, but it’s an even bigger deal when the payment is $224 million, and it’s all interest. The amount of money being leveraged, demanded, and now, lost by creditors and investors in Caesars Entertainment Operation Corp. is pretty hard to grasp, on a concrete level, but we know it’s a lot. A lot, a lot. So much so that the mutli-billion dollar operational gaming company is looking to file for Chapter 11 bankruptcy, resulting in outcries from the lienholders who are about to get almost none of their money back, the Review Journal reports. The irony implicit in the situation where these creditors gambled on Caesars isn’t lost on bankruptcy law firms in Las Vegas familiar with the gaming industry.
Missing that $224 million payment will put Caesars in default despite their ongoing attempts since September to restructure a $22.8 billion debt. Most of the accountants and attorneys at bankruptcy law firms in Las Vegas saw as far back as May of this year that it was probably a bad idea to keep borrowing when you’re $23 billion in the hole, but Caesars insisted to its creditors that it was a good investment, and they fell for it. And now they’re paying for it, too.
Gaming analyst Alex Bumazhny “estimated that 80 percent of the first-lien debt would be recovered through the bankruptcy plans,” but unfortunately for the creditors who gambled on a second lien, “less than 10 percent of the second-tier debt would be recovered.” Bumazhny estimates that Caesars has “less than a year of liquidity remaining,” making the situation pretty urgent. So far, “two first-lien creditors, hedge funds Perry Corp and Silver Point Capital, have bailed on the debt restructuring talks,” which isn’t good for anybody, really.
In a desperate attempt to stymie losses and protect their assets, with the counsel of its bankruptcy law firms in Las Vegas, Caesars moved “ownership of several casinos and its interactive gaming division into Casers Growth Partners, a separate publicly traded company,” which has thoroughly upset creditors, who claim that the move kept the best properties within Caesars while leaving CEOC with all the liabilities.
Caesars’ future is uncertain at this point; with some sources reporting that “a framework to a restructuring agreement has been reached which includes a prepackaged bankruptcy covering CEOC and moving the casinos controlled by CEOC into a real estate investment trust,” but others aren’t so keen on the idea, and Caesars itself has reported “in a Securities and Exchange Commission filing the REIT concept had been ‘superseded’ by other proposals.”
One thing is for sure, a business litigation attorney like Karl Shelton would know from working with bankruptcy law firms in Las Vegas: the fight is far from over. There’s a lot of money at stake here. Did we say a lot? We meant a lot. One creditor group—“which is owed $1.25 billion”—has filed a lawsuit demanding that Caesars’ corporate executives be removed from control. But don’t worry—even if Caesars goes bankrupt, you’ll probably still be able to play a slot machine in its casino on the strip for years to come.