Posts Tagged ‘Caesars.Entertainment’

As The Caesars Turns, Episode 2

Tuesday, September 27th, 2016

Caesars Entertainment Operating Company (CEOC) today announced that they reached a restructuring agreement with its major creditors. The deal will likely allow CEOC to emerge from bankruptcy early in 2017. The settlement must be finalized and will require approval of the bankruptcy court.

“It’s important to recognize that a lot of work needs to be done in the next few weeks. Will there be bumps along the road? Yes. Is this a durable deal? Yes,” said Bruce Bennett, a lawyer for Jones Day representing junior creditors.

The deal will have CEOC merge with Caesars Acquisition Company, with first tier lenders getting about 115 cents per dollar, first lien holders getting 109 cents, and junior debt holders getting between 66 cents to 83 cents on the dollar.

But not everyone is settling. Trilogy Capital Management has $22 million of CEOC’s unsecured bonds and will pursue its lawsuit against the casino giant. The next hearing in Trilogy’s lawsuit against CEOC is scheduled for October 6th in New York. Trilogy is asking for $160 million in the lawsuit. The lawsuit, if it goes to trial, would likely confirm or deny whether Caesars truly split into a “good” Caesars and a “bad” Caesars (as Trinity and others claimed).

Tune in next week to see what happens with Trinity’s lawsuit and whether any other obstacles appear for the closure of the bankruptcy of CEOC.

As the Caesars Turns

Thursday, September 22nd, 2016

There have been more developments in the Caesars bankruptcy. First, Caesars Entertainment said it is offering an additional $1.6 billion for junior creditors of Caesars Entertainment Operating Company (CEOC) in the contentious bankruptcy. The stock market reacted favorably to the news Caesars stock went up 21% today.

The underlying issue in the bankruptcy is whether Caesars management deliberately created a “bad” Caesars (CEOC) and a “good” Caesars (everything else). Junior creditors are accusing Caesars of exactly that. Lawsuits on this issue are on hold but unless a court extends an injunction they’ll start moving forward in October.

Earlier this month Judge Benjamin Goldgar ruled that junior creditors are within their rights to have top management at Caesars complete financial disclosure statements. As Bloomberg reported,

Apollo co-founder Marc Rowan, company principal David Sambur and TPG co-founder David Bonderman must provide the information to a committee of dissident creditors who are fighting a reorganization proposal for Caesars, U.S. Bankruptcy Judge A. Benjamin Goldgar ruled. That plan would release the men from any legal liability related to the Las Vegas-based gambling company’s bankruptcy. The bondholders say the men shouldn’t be shielded from lawsuits related to the bankruptcy.

But is $1.6 Billion more enough? Given that an independent examiner said Caesars could be liable for over $5 billion in damages, I suspect junior creditors may be thinking “no.” Caesars management is threatening to put all of Caesars in bankruptcy, with the obvious implication that you might get a lot less if the bankruptcy expands. Perhaps the junior creditors are thinking that this is a sign of desperation; that they’ll get 100% of their debt back by either lawsuits or a full bankruptcy; or that Caesars will increase their offer yet again in the future.

When the bankruptcy began I asked and answered some questions:

How long will the bankruptcy process take? A long time…

Who will profit from the bankruptcy? That’s a question with a sure answer: the lawyers…

Why aren’t all of Caesars’ hotels included in the bankruptcy? If you look at the list, some of the hotels are merely operated by Caesars and won’t be included in the bankruptcy even if the second-tier debtholders win. However, it is definitely possible that the bankruptcy could expand and take in more of Caesars than just CEOC…

Could some of Caesars’ properties be sold?
Definitely. If this does not end up being a prepackaged bankruptcy, then each tier of debtors will propose a plan. One plan could be to auction various properties, so it’s definitely possible.

Nothing has caused me to change my opinions on any of these answers. The soap opera, er, bankruptcy began in January 2015; if you placed a bet on it reaching two years without resolution, your bet looks like a winner to me.

So stay tuned soon for the next exciting episode of “As the Caesars Turns.”

Caesars Gets Another Month

Wednesday, August 31st, 2016

Caesars Entertainment Operating Company (CEOC) appealed Judge Goldgar’s decision to US District Court (decisions in a bankruptcy court get appealed to the District Court). Judge Robert Gettleman gave Caesars until October 5th; Judge Gettleman will hold a hearing in Chicago then. As reported in the Las Vegas Review-Journal, Judge Gettleman “…warned CEOC that it faced an ‘uphill’ fight.”

The pause does give time for the two sides to negotiate. That said, the junior creditors who filed $11 billion in claims against Caesars appear unwilling to settle for what Caesars has offered. The claims relate to allegations that Caesars deliberately reorganized to create a “good” Caesars and a “bad” Caesars. A court appointed examiner has already said that the junior creditors are likely to prevail.

Fail, Caesar: The Bankruptcy May Grow

Sunday, August 28th, 2016

On Friday, Bankruptcy Judge Benjamin Goldgar ruled that an injunction against $11 billion in lawsuits over how Caesars split itself into various units will be allowed to expire on Monday, August 29th. Given that the first of several court rulings in the various lawsuits is due on Tuesday, August 30th there’s a definite possibility that the rest of Caesars will join Caesars Entertainment Operating Company (CEOC) in Chapter 11 bankruptcy.

The dispute is over whether Ceasars (and its private equity owners, Apollo Global Management and TPG Capital) created a “good” (or healthy) Caesars and a “bad” (or unhealthy) Caesars (CEOC being the unhealthy Caesars). CEOC offered $4 billion extra in its reorganization plan if the junior creditors (they’re the ones who were protesting and suing over this dispute) would agree to the offer. While one junior creditor accepted the offer, most did not. Judge Goldgar wondered why the private equity owners weren’t contributing any of their own money to resolve the dispute. My cynical belief is that Apollo and TPG wanted to have their cake and eat it, too.

While CEOC plans on appealing the ruling, that’s a long shot. Given that a bankruptcy court examiner felt that the lawsuits could succeed (with damages as high as $5.1 billion), one possible means out for Caesars is to put the rest of Caesars into Chapter 11.

This coming week will be very critical for the future of Caesars.

Fail, Caesar! A July Update

Saturday, July 23rd, 2016

Since I last reported on the bankruptcy of Caesars Entertainment Operating Company (CEOC) there has been some news:

1. The junior creditors appear to be no closer to agreeing with the senior creditors on a restructuring of CEOC. The latest obvious strife was when Judge Benjamin Goldgar threatened sanctions against the junior creditors for objecting to CEOC employing the law firm of Kirkland & Ellis as bankruptcy counsel. Jones Day, the counsel for the junior creditors, then withdrew their objections.

2. A Chinese consortium is apparently bidding for the Caesars Interactive Entertainment Inc, a unit of Caesars Acquisition Company (CAC). CAC is not in bankruptcy (at least for now). Given the current acrimony in the bankruptcy it is almost a certainty that the junior creditors will object to this sale (unless the proceeds are funneled to them, and there’s no chance that the current owners of Caesars want that to happen) so this deal is very unlikely to move forward until the bankruptcy is settled. Reports are that the World Series of Poker is not part of the proposed sale.

I still believe that the most likely outcome is for all of Caesars to be forced into bankruptcy, and this is more likely to happen sooner rather than later.

Caesars Bankruptcy: An Update

Sunday, May 15th, 2016

When last we left the bankruptcy of Caesars Entertainment Operating Company (CEOC) (nearly four months ago), a complete reorganization wasn’t ruled out but Caesars was still in control of the bankruptcy. Over the last four months:

  1. In mid-March, a bankruptcy investigator reported that Caesars management deliberately hurt CEOC through its transactions prior to bankruptcy.  This is what junior creditors claimed both to the bankruptcy court and various lawsuits.  Bankruptcy investigator Richard J Davis wrote,

    The principal question being investigated was whether in structuring and implementing these transactions assets were removed from CEOC to the detriment of CEOC and its creditors.

    The simple answer to this question is “yes.” As a result, claims of varying strength arise out of these transactions for constructive fraudulent transfers, actual fraudulent transfers (based on intent to hinder or delay creditors) and breaches of fiduciary duty by CEOC directors and officers and CEC. Aiding and abetting breach of fiduciary duty claims, again of varying strength, exist against the Sponsors and certain of CEC’s directors. None of these claims involve criminal or common law fraud.

  2. Marc Rowan, of Apollo Global Management, resigned from the board of directors of Caesars three days after that investigative report was released.
  3. From Fortune comes the report that an extramarital affair by a restructuring advisor working for CEOC cost Caesars a team of key advisors.  Melissa Knoll had been hired by Caesar to probe the allegations noted above.  “She was sleeping with the enemy,” bankruptcy judge Benjamin Goldgar said.  “Because the investigation is tainted in this way, there isn’t any point in pursuing it.”
  4. On May 2nd Judge Goldgar gave Caesars’ creditors another two weeks to agree or disagree with Caesars’ restructuring plan.  Creditors are waiting for details that were supposed to have been provided to them by April 22nd; Judge Goldgar ordered that the information be released by last Saturday, May 7th.  The next hearing is set for May 25th.
  5. On May 6th Caesars announced that it hired former federal bankruptcy judge Robert Gerber as “Chief Restructuring Officer” and warned that it could be forced into bankruptcy.
  6. Caesars has reportedly received multiple unsolicited offers for its interactive gaming unit.  This unit, Caesars Interactive Entertainment, offers interactive games on Facebook; it also owns the World Series of Poker.  The bids are supposedly in the $4 billion range.  Do note that this unit is one of those that creditors claim was transferred at less than fair market value from CEOC, so a sale would likely get tied up in court.

I am not an attorney, so my speculation is just that: speculation. That said, Caesars’ goal of creating a bad Caesars and a good Caesars and having just the bad Caesars go through Chapter 11 doesn’t look like a good bet to succeed.

Fail, Caesar! An Update

Thursday, January 21st, 2016

It’s been just over a year since Caesars Entertainment Operating Company (CEOC) declared bankruptcy. If Caesars Management was hoping that the court-appointed examiner would be giving them good news, and that the company would be coming out of bankruptcy unscathed, well, the news of the day is anything but.

Yesterday’s Wall Street Journal noted that a reorganization is not a given. Judge Benjamin Goldgar noted,

It doesn’t have to end with a confirmed plan…A trustee could be appointed, the case could be dismissed or, my favorite, the case could be converted to chapter 7 [liquidation], which would just be a hoot, wouldn’t it?

It’s likely the temperature in Caesars’ boardroom dropped ten degrees when they heard about that. As to why the judge made the remark, it turns out that Caesars doesn’t want the examiner’s report made public. Now why is that, as examiner’s reports (in a bankruptcy) are normally made public? Could it be that there’s damaging information in the report?

If we are to believe a report in the New York Post that’s exactly why. “Court-appointed probe will slam Caesars for fraud,” screams the headline. The first two paragraphs tell the story:

Caesars Entertainment’s court-appointed examiner has told company officials and creditors’ lawyers he believes the company acted improperly when it transferred assets away from the hobbled casino prior to putting it into Chapter 11, The Post has learned.

A report by the examiner, expected to be released next month, is likely to conclude there was a degree of civil fraud connected to the transfer, three sources with direct knowledge of the talks said.


As to what this means, quite a bit, and none of it is good for Caesars’ plan to get out of bankruptcy:

  • The transfers made just before the bankruptcy (allegedly moving Caesars’ best assets out of CEOC prior to the bankruptcy) could be undone, dragging more of Caesars into bankruptcy;
  • There could be personal liability for members of the Board of Directors of Caesars; and
  • Asset sales and a very different exit for Caesars from bankruptcy would become far more likely.

For my poker-playing readers, it’s still unlikely that this will have a direct impact on this year’s World Series of Poker. It’s in everyone’s interest that the WSOP operate as planned because it’s profitable. That said, I would not be surprised to find assets such as the WSOP owned by someone besides Caesars by the end of the year.

Fail, Caesar! Update

Thursday, July 23rd, 2015

Yesterday US Bankruptcy Judge Benjamin Goldgar ruled that various lawsuits against Caesars Entertainment can go forward. Caesars Entertainment Operating Company (CEOC) is already in bankruptcy; this ruling increases the chances that Caesars Entertainment Corporation (CEC) follows CEOC into Chapter 11.

“‘There is now the potential that this bankruptcy can get very litigious, complex and long,’ said David Tawill, president of the Maglan Capital hedge fund.”

So what does this mean? First, I don’t think there’s potential that the bankruptcy will get very litigious, complex and long; rather, there’s near certainty that it will. I earlier wrote that the bankruptcy would take “a long time” to resolve; I think that’s certain.

Additionally, that the other lawsuits are going forward is bad news for the current owners of CEC. Imho, they were hoping that they could create a “bad” company, get rid of a ton of debt, and emerge from Chapter 11 with something of value. That’s now less than an even bet.

Instead, the lawsuits are likely telling the truth: That CEOC was created as a way of shuffling assets. This means it is now more likely than not that the rest of Caesars will end up in Chapter 11.

That would put a stop to the lawsuits. It would also mean the current majority owners of CEC (Apollo Global Management and TPG Capital) will see the value of their investment go towards $0. It could also mean that some of the current assets of Caesars will end up being sold. The big problem with Caesars is their debt load. Bankruptcy will get rid of the debt, and many of the underlying assets have substantial value.

One last certainty: The lawyers involved will be making plenty of money.

Fail, Caesar!

Monday, January 19th, 2015

Last week Caesars Entertainment Operating Company (CEOC) filed for Chapter 11 bankruptcy in Chicago. One week ago, second-tier bondholders filed an involuntary bankruptcy petition in Delaware. A company can only be in one bankruptcy court, so there’s an obvious issue: Which bankruptcy filing will “win”? And what will the future bring to Caesars?

I’m going to do some speculation in this post. Be forewarned that I am not an attorney, so my views are just that: my views on the topic. I was in corporate finance for many years prior to being in tax, so I am familiar with many of the issues involved.

First, not all of Caesars is in the bankruptcy filing. Caesars split into two major entities, and only CEOC is in Chapter 11 (for now). Here’s a handy chart for what’s in and what’s not. Caesars Growth Partners (CGP) did not file for bankruptcy.

However, the second-tier creditors believe that Caesars deliberately made a “good” company (CGP) and a “bad” company (CEOC). A federal judge ruling on a lawsuit in New York gave tacit support to the second-tier creditors when she allowed the lawsuit to continue.

Let’s go through some questions and their probable answers:

1. Why did Caesars file for bankruptcy in Chicago? They are a Delaware corporation headquartered in Las Vegas? In bankruptcy, you can file anywhere you have nexus. Caesars has two casinos in Illinois, so the Northern District of Illinois is a possible choice. Presumably, Caesars looked at the likely judges anywhere in the country they could file (including Courts of Appeal–here, the Seventh Circuit Court of Appeals) and liked the Northern District of Illinois over other choices.

2. Then why did the second-tier creditors file in Delaware> Caesars is a Delaware corporation, so a filing in Delaware is also valid. The second-tier creditors probably did the same analysis as Caesars and liked the Delaware judges and the Third Circuit Court of Appeals.

3. There are two bankruptcies: the involuntary petition in Delaware and the voluntary petition in Chicago. Which one is likely to stand? This is the question today, and it’s a pick-em. There is a burden on the second-tier creditors, but the federal court ruling in New York gave them some advantages. Judge Kevin Gross in Delaware will end up making the initial call. That said, if he rules that the case should be in Delaware, I expect that CEOC will file an appeal.

4. How long will the bankruptcy process take? A long time. While CEOC wanted a prepackaged bankruptcy where most everyone agreed, that just isn’t happening. True, 80% of the senior (first-tier) creditors approve of the restructuring. However, no other class of creditors is happy. While it’s theoretically possible that Caesars will exit bankruptcy in 2015, it’s not likely.

5. Who will profit from the bankruptcy? That’s a question with a sure answer: the lawyers.

6. Why aren’t all of Caesars’ hotels included in the bankruptcy?
If you look at the list, some of the hotels are merely operated by Caesars and won’t be included in the bankruptcy even if the second-tier debtholders win. However, it is definitely possible that the bankruptcy could expand and take in more of Caesars than just CEOC.

7. Will this impact the World Series of Poker? It’s not likely to have an impact for 2015, but it definitely could sometime in the future. The WSOP is owned by Caesars Interactive Entertainment, Inc.; that’s not currently part of the bankruptcy filing (but it could be if the second-tier wins out).

8. Could some of Caesars’ properties be sold? Definitely. If this does not end up being a prepackaged bankruptcy, then each tier of debtors will propose a plan. One plan could be to auction various properties, so it’s definitely possible.

9. Why did Caesars file bankruptcy?
CEOC has been losing money for years and has over $18 billion in debt. The problems stem from the leveraged buyout that Caesars went through several years ago. At that time, the economy was booming and had things continued at the same rate Caesars would have been fine. That didn’t happen.

10. What will happen to the stockholders of CEOC?
That’s another question with a certain answer: Their stock is near worthless.

As 2015 progresses we’ll have a better idea how the reorganization of Caesars progresses. It will have a huge impact here in Las Vegas, and it is likely that things will not work exactly how Caesars management want. We’ll get an early read on this when Judge Gross rules on where the bankruptcy actions will take place.

Who Gets the Charitable Donation for the WSOP’s One Drop Events?

Monday, July 1st, 2013

At this year’s World Series of Poker, there are two events where money is donated to the One Drop Foundation: the high rollers event with a $111,111 buy-in (won by Tony Gregg for $4.8 million over the weekend), and the “Little One for One Drop” later this week with a $1,111 buy-in. I received an email over the weekend:

I played in the High Rollers No-Limit Hold’em over the weekend, and was wondering if I got the charitable donation or if Caesars [the owners of the WSOP] did? According to the WSOP, $3,333 of the entry went to One Drop.

The Tax Code (which is law) requires that charitable donations be substantiated. This can be done through a written statement provided by the charity. These can also be proven through copies of cancelled checks, credit card statements showing the donation, and cellphone statements. However, anyone claiming a donation of $250 or more must obtain the written acknowledgment from the charity.

The individual who sent me an email also sent a copy of his buy-in receipt. It clearly shows he entered the High Roller event for $111,111; however, nowhere on the receipt does it show a donation receipt to any charity for any amount–just that the individual paid $111,111 to enter the tournament. An individual player does not meet the Tax Code’s substantiation requirements for a charitable donation.

As to who gets the donation, that’s clear: Caesars does. They have taken $3,333 from each of the 166 entries and donated $553,278. Caesars will be able to take the donation on their corporate tax return (subject to the restrictions on charitable donations made by corporations).

I assume the entry receipts for the Little One for One Drop will be similar (nothing being shown on the receipt acknowledging the charitable donation). Thus, the charitable donation of $111 per entry in the Little One for One Drop is rightly taken by Caesars. However, poker players entering the Little One for One Drop (and those who entered the One Drop High Roller event) do have a gambling loss if they do not cash in the event.