Caesars Entertainment merger complete; CEOC plan takes effect Oct. 6

By Caroline Salls

Pittsburgh, Oct. 6 – Caesars Entertainment Corp. completed its previously announced merger with Caesars Acquisition Co. (CAC) and Caesars Entertainment Operating Co., Inc. (CEOC) and its debtor subsidiaries completed their restructuring on Friday, according to a news release.

As a result of these transactions, the newly restructured Caesars Entertainment said it is positioned to further invest in its growth strategy and realize the benefits of a simpler and less leveraged capital structure.

The company said conclusion of CEOC’s Chapter 11 bankruptcy required completion of a number of procedural steps, which were scheduled to occur during the course of the day on Friday.

CEOC announced in a notice filed with the U.S. Bankruptcy Court for the Northern District of Illinois that its plan of reorganization took effect on Friday.

The plan was confirmed on Jan. 17, 2017.

“The conclusion of CEOC’s restructuring leaves Caesars Entertainment with an expected enterprise value of approximately $20 billion based on yesterday’s closing prices,” Caesars Entertainment president and chief executive officer Mike Frissora said in the release.

“With reduced leverage, increased free cash flow and the new REIT structure, we are positioned with a solid foundation to pursue a diversified growth strategy.

“Total capex from 2015-2017 is expected to exceed $1.5 billion, which will benefit the company going forward.

“We are also executing hundreds of initiatives to generate incremental revenue, as well as to enhance operational efficiency, guest experiences and employee engagement through technology-driven innovation and process improvement.”

Enhanced cash flow

Caesars Entertainment said it has further enhanced its strong free cash flow profile through opportunistic refinancings that have resulted in combined interest savings of roughly $270 million. These savings include the anticipated benefits of refinancing all Caesars Entertainment Resort Properties, LLC and Caesars Growth Properties Holdings, LLC debt. These refinancings are expected to close later this year.

The company said it expects to unlock new opportunities for organic and inorganic growth across global markets supported by a strong free cash flow profile following CEOC’s emergence from bankruptcy.

Caesars Entertainment said it has about $2 billion in cash.

Merger terms

Under the terms of the merger, CAC stockholders each received 1.625 shares of Caesars Entertainment common stock per share of CAC class A common stock.

Additionally, CEOC separated virtually all of its U.S.-based real property assets from its gaming operations with Caesars Entertainment continuing to own and manage the gaming operations. These real property assets are now held in a newly created real estate investment trust called VICI Properties, Inc., which is owned by some of CEOC’s former creditors.

Caesars Entertainment said it will pay rent to VICI as it continues to operate the properties. Major decisions related to these properties will be made by Caesars Entertainment in collaboration with VICI’s board and management. Similarly, Caesars Entertainment and VICI may at times partner on these and other development and growth investments.

Creditor treatment

As previously reported, under CEOC’s Chapter 11 plan holders of first-lien notes claims will receive a combination of cash, notes, preferred stock and new debt.

Holders of second-lien notes claims and senior unsecured notes claims will receive a share of cash, new convertible notes and preferred stock.

Holders of subsidiary guaranteed notes claims will receive a share of new convertible notes and preferred stock.

Holders of unsecured claims and insurance-covered unsecured claims will receive a cash payment from a creditor pool and recovery equal to 59.26% from an unsecured creditors securities pool, subject to a common equity buyback.

Holders of par recovery unsecured claims, Winnick unsecured claims, Caesars Riverboat Casino unsecured claims and Chester Downs management unsecured claims will receive a share of new convertible notes and preferred stock.

Non-obligor unsecured claims will be paid in full in cash.

Holders of pre-bankruptcy credit agreement claims will receive a share of cash, a $1,961,000,000 property company first-lien term loan, a $1.45 billion property company second-lien upsize amount, subject to the right of creditors to receive equity instead, series A preferred stock, which shall be exchanged under the merger for 4.01% of new Caesars Entertainment common equity, and an additional Caesars Entertainment bank consideration.

Holders of CEOC interests will receive no distribution.

New board

In a separate release, Caesars Entertainment announced the members of its new board of directors, which will be chaired by James Hunt.

Frissora will remain an executive member of the board.

The other members of the new board include Thomas Benninger, John Boushy, John Dionne, Matthew Ferko, Don Kornstein, David Sambur, Richard Schifter, Marilyn Spiegel and Christopher Williams.

Caesars is a Las Vegas-based casino-entertainment company that filed for bankruptcy on Jan. 15, 2015. The Chapter 11 case number is 15-01145.

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