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Caesars Entertainment Declares Bankruptcy or See Loveman's New Haircut

By Chuckmonster on Thursday, 15th January 2015 1:06pm
  » filed under Las Vegas  comments: 17

   

Well, we all knew it would come to this, Caesars Entertainment has filed for Chapter 11 bankruptcy protection. But there is more to the story than just that. Caesars has been in a battle with investors for roughly six months over terms contained in the pre-packaged agreement. At loggerheads, it became a giant game of financial chicken - would investors push Caesars to bankruptcy or would Caesars jump off the ledge, themselves. Caesars jumped.

At stake here are the assets. Caesars owners Apollo Texas-Pacific Group want to keep them and pass as much of the pain onto lenders as they possibly can. The solution Caesars has devised ratifies The Vegas Law - the house always wins.

To fully understand, it makes sense to have some understanding of Caesars Corporate Structure. This is an older version of the structure, some things have moved around over the last few months as bankruptcy proceedings loomed.

As you can see, Caesars is divided in to many many many subsidiary corporations, each of which hold different classes and types of assets, the organization of which was decided on by a crack team of poop-flinging monkeys with M.B.A.'s from a local online college.

Working from the top down, the entirety of what we call Caesars Entertainment is really a company called Hamlet Holdings. Hamlet Holdings is split into two subsidiaries, Caesars Aquisition Company (CAC) and Caesars Entertainment Company (CZR). CAC is newer purchases, emerging projects and online gaming. CAC makes up 48% of Hamlet Holdings, CZR the other 52%, 15% of which is floated on the Nasdaq under the $CZR ticker. Still following?

CZR proposes that - as part of the pre-packaged bankruptcy - one subsidiary 'Caesars Entertainment Operating Company' (CEOC) be split into two sub-subsidiaries, an OpCo and a PropCo. The PropCo is a real estate investment trust (REIT) which puts the property assets and land value of 18 properties into a trust whose beneficiary is lenders who Caesars has defaulted on. The OpCo is an operating company whose responsibility is to operate, maintain and upgrade the property as well as pay agreed upon amounts of rent to the PropCo for an agreed upon period of time. If OpCo defaults on payments the PropCo has the right to seek renumeration in various forms via moderation, lawsuit or seizure of properties.

Caesars has gotten approval of this plan by 80% of lenders, the other 20% are not on board. The case now goes to a bankruptcy judge, who will go through the whole thing sort out the details and find a solution. Should the judge agree with Caesars plan, Apollo Texas Pacific d/b/a Hamlet Holdings will be free and clear of debt, the REIT will be instituted and Caesars will have kept 2/3 of their assets by leveraging the real estate value of 3rd tier riverboats, declining Reno, Tahoe and AC joints plus Caesars Palace minus Octavius Tower.

A complex card game indeed, and when the house makes the rules, the house always wins... over time. Investing and gambling are both macro-economic games of chance.

Caesars set up a website http://www.ceocrestructuring.com upon which a serious, slightly contrite Caesars CEO Gary Loveman gives the "When The Fun Stops" speech to jilted investors. Also worth nothing that his extreme makeover seems to be reverting back to Dutch Boy. Stress, man.



Tagged: caesars entertainment   bankruptcy   loveman   ovaltine   





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Comments & Discussion:

Where's the picture of the haircut? I need a new style and was hoping for some inspiration (my stylist is not, really, in touch with the latest trends)!

Well that's one way to keep the plates spinning but why would Caesars Palace in Vegas be separate? Wouldn't it make more sense to have all the Vegas holdings in one basket?

The only reason I think Caesars in Vegas was separate is to give REIT some actual weight. If it wants on there who would approve the plan?

I will never do another dollar of business with Caesars. If there were any fairness, Gary Loveman should commit seppuku on YouTube Live. What will happen instead is that he'll get a pay raise for running a "house always wins" company into the ground, against all common sense and math. 'Merica!

Thank you for the "shat-phone" avatar! I hope I'm proven wrong. I've been waiting for years for the Paris balloon... Ahh, never mind....

This is definitely not going to be your typical bankruptcy, as there are legal actions in Delaware and New York that aren't going to make this a simple process. There's a group of junior creditors that filed an involuntary bankruptcy petition against CEOC on Monday and in an emergency court session in Delaware, they've gotten the judge there to essentially put the brakes on the Illinois bankruptcy filing and they argue that their petition takes precedence and the bankruptcy should proceed in Delaware. The New York lawsuit filed by some creditors is in regards to the company shifting assets around and that the company violated Federal law in the process. So grab some popcorn and sit back and watch the possible fireworks.

http://www.reuters.com/article/2015/01/15/caesars-bankruptcy-idUSL3N0UU2WP20150115

The night before the morning I read this, I dreamed that I showed up in Las Vegas, to discover that Bally's was permanently closing, for reasons unclear.

This is a good write-up; I'm not too sharp on such matters, so I'm still mentally doing the math. As a lowly consumer, I suppose my own interests are the most compelling to me. (The Council Bluffs properties are three hours away, and I have yet to visit them.)

Wow. I think the mob books were easier to understand.

And does anyone else picture Gary Loveman as the innkeeper from Les Miz?
https://www.youtube.com/watch?v=_vL7N9MMyHs

vespajet is right, as is Butler. Whether your Total Rewards hold on or not, this has been the epitome of watching a company getting stripped for parts, whether you were on the right or wrong side (FYI - I didn't lose a penny, I just think the whole showing has been appalling.)

I wish the best for all of the Caesars employees, and I mean that to the core. They've been making holidays great for as many people as they could. It's their management that should be ashamed of themselves for flushing a great company down the toilet without any employee hands on the wheel. I only hope they can recover and regain the trust all of those front-line employees have tried so hard to earn over the years. They deserve better than their loyal customers leaving because ... sucked on their last visit.

Dunno how you broke it down Chuck, but thanks.

Loveman is Leno-esque in how bad he is at reading a prompter.

This shitstorm looks like Dante's rings of hell, only Satan has a better haircut.

2 questions...

1) Does the OpCo or PropCo own the Caesars name, trademarks, etc? I think those are pretty valuable long-term.

2) If (when?) the OpCo defaults and the creditors take the PropCo assets. Am I reading it right that Caesars Palace as we know it would be split with the OpCo keeping just Octavius tower but the PropCo keeping the casino and the rest of the towers, colosseum, pools, etc?

Looks like the shit may have hit the fan.

http://www.bloomberg.com/news/2015-01-19/caesars-bankruptcy-reorganization-dealt-setback-by-federal-judge.html

It makes me happy that the investors and the judge saw through the shell game Caesars has been playing. "Well raise debt to buy and build half of the Monopoly board, then we'll sign the mortgage of the railroads & utilities to jilted lenders and keep the rest."

@etm117 1) the only change here is that the land - the property and assets on it - go into PropCo. Caesars keeps all brand equity, names, stuff.

2) Octavius etc, was built on a different parcel of land that was vacant and unused until Augustus and Octavius were built 8 years or so ago. They call it 'Octavius", but i think it is everything on that parcel of land. Dividing is symbolic gesture of "we're keeping cream, and you get to fuck off."

With this latest news. the OpCo and PropCo plans are likely DeadCo. The Caesars spokesweasel quoted in the Bloomberg article seems to think that this won't change their plans:

"'Given the size of the claims at issue and our strong defenses, we do not expect the ruling to impact the planned reorganization,' spokesman Stephen Cohen said in the statement."

Denial is not just a river in Egypt.......

Now we await the decision of a judge in Delaware in regards to where the bankruptcy case will proceed, in Delaware (where creditors filed an involuntary bankruptcy petition a week ago) or Illinois (where the company filed their voluntary bankruptcy petition last Thursday). Regardless of what jurisdiction ends up with the case, the waters are quite muddied and this could get very ugly, especially with the judge in the NY case saying that the company violated Federal laws.

Personally, I hope Caesars prevails so I can leverage the court proven strategy. Hillbilly holdings will form two subsidiaries. One will own the decrepit dogwood tree in my front yard and the other will keep everything else. The Dogwood REIT will assume the mortgage for the entire property. Bank of America can then foreclose on that shaggy old bastard and with any luck, they will dig it up and take it with them.

If I feel very lucky, I might form 3 companies and assign the property taxes to a row of shrubberies I'm not very fond of.



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