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Caesars: Bank Lenders’ Ad Hoc Committee Releases Information on Restructuring Discussions

February 02, 2015, 07:52 AM
Filed Under: Bankruptcy

Caesars Entertainment Corporation ("CEC") and Caesars Entertainment Operating Company, Inc., a majority owned subsidiary of CEC ("CEOC") engaged in confidential discussions with certain beneficial holders (the "Bank Lenders") of first lien debt (the "Bank Debt") incurred by CEOC, by and among CEC, CEOC, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent, regarding the restructuring. 

The confidential discussions took place at a meeting held on January 29, 2015, however at this time, the Bank Lenders have not been able to reach an agreement with CEC and CEOC.  At the Meeting, CEC and CEOC provided certain confidential information (the "Discussion Materials") to the Bank Lenders pursuant to non-disclosure agreements ("NDAs") among CEC, CEOC and the Bank Lenders.  The Discussion Materials have been posted here.

The Bank Lenders' NDAs with CEC and CEOC have now expired pursuant to their terms and the information contained herein is provided by the Bank Lenders in connection with their rights under the NDAs.  Any financial information contained in this press release and posted to the URL above was provided by CEC and CEOC, and the Bank Lenders make no representations or warranties whatsoever with respect to such information, and disclaim any responsibility of any kind to anyone for any use of, or reliance on, this information or any omissions therefrom.  The information set forth herein and provided in the Discussion Materials is subject to the disclaimer set forth at the end of this press release.  All capitalized terms used, but not defined herein, shall have the meanings ascribed to such terms in the RSA.

The Discussion Materials posted to the URL above convey CEC's and CEOC's views, and describe some, but not all, of the terms contained in a proposal previously provided by the Bank Lenders to CEC and CEOC.  Specifically, the Bank Lenders had included a larger convertible note than that described in the Discussion Materials for possible purchase by junior creditors, with the proceeds from all convertible notes to be used to reduce debt at OpCo, PropCo and CPLV.

During the Meeting, CEC and CEOC stated that pursuant to the terms of the transaction described in the RSA, OpCo would use cash from operations to first pay interest due on the New First Lien OpCo Debt and New Second Lien OpCo Debt and then to pay the obligations due under the Leases, including, without limitation, on account of rent and capital expenditures.

In addition to the Discussion Materials, in the Meeting, CEC proposed, in response to issues raised by the Bank Lenders and in order to try to reach a consensual agreement with the Bank Lenders (1) to amend the existing guarantee with respect to the amounts outstanding under the Credit Agreement (the "CEC Credit Agreement Guarantee") to guarantee (a) the New First Lien OpCo Debt and New Second Lien OpCo Debt to be received by the Bank Lenders in the Restructuring and (b) the CPLV Mezzanine Debt, if any, to be received by the Bank Lenders and (2) an additional payment of $19 million by CEC (for a total payment of $300 million over twelve months, or approximately 70% of the non-default contract rate of interest on the Bank Debt, as compared to 80.7% over nine months as expressed in the Discussion Materials) to the Bank Lenders to settle any possible claims under the CEC Credit Agreement Guarantee.  In response, the Bank Lenders proposed that (x) the guarantee described in clause (1) above be a payment guarantee secured by all assets of the parent guarantor, (y) the Bank Lenders receive their full non-default contractual rate of interest (as opposed to their earlier request for default rate of interest) for the full post-petition period from CEC (less the monthly adequate protection payments at a rate equal to 1.5% per annum to be made to the Bank Lenders pursuant to the terms of CEOC's cash collateral order) with an upfront payment by CEC for forbearance from the exercise of certain rights and remedies equal to the amount of interest due for one quarter (the "Upfront Payment"), and (z) in response to CEOC's rejection of certain structural protections to the transaction provided for in the RSA that were requested by the Bank Lenders to, in their view, ensure payment in full of the Bank Debt, CEC make an additional payment of $294 million to the Bank Lenders at Exit to the extent that CEOC was otherwise unable to syndicate the New First Lien PropCo Debt in the market. In response, CEC offered a modified Upfront Payment of $100 million, but otherwise, CEC and CEOC rejected the Bank Lenders' proposals.

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