Heavily indebted Caesars Entertainment Corp. (CZR) hopes to “buy some time” by restructuring about $4.84 billion worth of debt through a series of new placements.
The new plans, announced last week, were described by the company as offering its bondholders up-front payments on its existing loans but also using two of its major assets – the newly opened Octavius Tower and the under-construction Linq project – to sweeten the deal.
The first segment of the restructuring involves a $300 billion term loan that has been priced at Libor plus 5.5% interest. It was expected the company would price its $500 million first-lien notes at 7% while the second lien notes would be listed at between 9.5% and 10%.
Caesars’ debt restructuring reportedly was due to the need to pay some $4 billion in debt due before the end of the calendar year.
This is the second restructuring arrangement announced in recent weeks by the country’s largest casino operating company. Previously, the company said it would spin off Caesars Interactive into a separate company that would also include Planet Hollywood Hotel/Casino on the Las Vegas Strip and other company assets.
The spin off would place the company’s other major assets in Caesars Operating Company. However, Apollo Global Management and TPG Capital, the two investment firms that took Caesars private just prior to the recession, maintain a 70% stake in both companies.
With the downturn in the nation’s economy following the company becoming privately-owned, Caesars Entertainment has been troubled with payments on debt that has risen from $21 billion to an estimated $23 billion.
According to TheStreet.com, some bondholders, who initially feared Caesars would be forced into bankruptcy because of the large debt, now believe the restructuring will only delay the inevitable.
Said one bondholder, “It’s just a lot of debt…You need to run this through a Chapter 11 process just to clean up the holdouts.”
Ray Poirier is the longtime executive editor at GamingToday.
Contact Ray at [email protected].