It was bound to happen sooner or later: Holders of second-lien bonds ($3.7 billion worth) have charged Caesars Entertainment with default. They cited the offloading of Caesars New Orleans and other high-value properties, as well as the removal of guarantees on Caesars Entertainment Operating Co.’s debt, undercutting the negotiating power of second-lien creditors. More than 50% of the second-lien holders are said to support the action. According to Bloomberg News, Caesars “said the asset transfers followed a rigorous, independent process designed to provide liquidity crucial to its business.”
Faced with an involuntary bankruptcy filing or even foreclosure, beleaguered CEO Gary Loveman wasn’t taking it lying down. “We will not allow our company, our employees and the communities in which we operate to be held hostage by a minority of holders whose interests are contrary to the long-term health of the company,” he ranted in an SEC filing.
Five investment firms are said to be pressing the action, although their identities are unconfirmed. They allegedly include Canyon Capital Advisors, who brought down the ancien regime at Hooters Hotel. (The wonderfully named Contrarian Capital Management has also been fingered as part of the cabal.) KDP Investment Advisors analyst Barbara Cappaert wrote, ““Bondholders are fighting back with whatever they can in order to better position themselves in an inevitable debt restructuring. Clearly the wheels are in motion for restructuring talks, even if they are starting out on a contentious note.”
Still, with $11.7 billion in first-lien debt sitting out there, the second-lien holders may have trouble forcing the issue. They could also push Caesars into bankruptcy, although that might be their endgame. Calling the claims “meritless,” Caesars responded, “Over the past several years, the company and its affiliates have completed nearly 50 capital markets transactions and more than $3 billion has been invested to expand and upgrade the Caesars network.” It insisted that the offloading of assets to affiliates like Caesars Growth Partners was done for fair market value and “through a rigorous, independent process.”
(If your left hand sells something to your right hand, I fail to see the independence of the transaction, but we’ll leave it there for now.)
Glass ceiling shattering. For the longest time, casino directorship was a male bastion of privilege, but that’s been crumbling for some time now. At MGM Resorts International, Renee West reigns over Luxor and Excalibur while Cynthia Kiser Murphey is top executive at New York-New York. Doing them one better, Eileen Moore is president of the Flamingo, Quad and Cromwell. Kudos to Caesars Entertainment for keeping pace with progress in this town. Both the general manager and assistant GM of The Cromwell are women as well, suggesting we’re near a day when such things are no longer newsworthy.
Heartbreak hotel. Could the Las Vegas Hotel go the timeshare route? John Katsilometes says so. “Goldman Sachs, which has invested a healthy sum to keep [Raiding the Rock Vault] from closing at the LVH Theater, has been shopping the hotel aggressively for many months” and Katsilometes identifies Westgate Resorts as the likely buyer. The asking price is reportedly in the neighborhood of $150 million. How the mighty have fallen. (Contra the Sun, Westgate no longer runs the timeshare towers at Planet Hollywood, now part of the Hilton Worldwide family.)
