Published On: Mon, Dec 22nd, 2014

Bankruptcy on Horizon for Leon Black’s Caesars Entertainment

Caesars Entertainment

Financier Leon Black’s Caesars Entertainment, America’s No. 1 casino chain, said on December 19 it expected its largest subsidiary to file for bankruptcy in mid-January. The subsidiary, whose holdings include Harrah’s Atlantic City, is losing hundreds of millions as it unsuccessfully battles a huge pile of debt, Macro Insider said.

However, critics attacked the proposed filing date as unattainable.

“I feel Jan. 15 is a pipe dream, ” a source close to the matter said, claiming that Caesars will not have a deal with its main creditors until at least March 20, according to the report.

Caesars is attempting to arrange a pre-packaged bankruptcy that provides its private equity owners with the possibility to nevertheless make revenue by giving them ownership in two recently-created subsidiaries that will not be a component of the Chapter 11, according to the report.

Caesars has reached a deal with all members of the very first lien note-holder steering committee, it said Friday. The committee, which involves Paul Singer’s Elliott Management, sources stated, asked a judge last week to force Caesars into bankruptcy, the report said.

Caesars added that the expected Chapter 11 is conditioned upon all debt holders dropping any lawsuits against the company

The subsidiary that Apollo Global Management wants to put into bankruptcy, Caesars Entertainment Operating Co., owns 3 of Atlantic City’s eight remaining casinos – Bally’s, Caesars and Harrah’s, according to the report.

Holders of a Caesars term loan, such as BlackRock, have not been integrated into Friday’s agreement. Caesars will likely need to have at least them and the first-lien holders on board to restructure the business enterprise in its way, Macro Insider said.

Elliott and other hedge funds own credit default swaps against Caesars that expire March 20. Numerous credit default swaps have been bought from BlackRock, making it unlikely the asset manager will agree to any restructuring ahead of that date, a source close to the situation said.

Elliott also owns swaps that expire Saturday and will soon be worthless, sources stated. Elliott declined to comment and BlackRock did not return calls seeking comment, the report said.

Earlier this month, Black’s Apollo Global Management failed in its attempt to acquire PetSmart Inc., the largest pet store chain in the U.S.

Apollo has made its reputation over the past 20 years for its willingness to make bold bets on out-of-favor companies and turn them around, Crain’s New York Business said in March.

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