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Bankruptcy: Caesars in restructuring pact with first-lien leveraged loan holders

caesarsCaesars Entertainment Operating Co. (CEOC) and its parent Caesars Entertainment Corp. (CEC) reached an agreement with CEOC’s first-lien leveraged loan lenders on the terms of a restructuring the company announced late Friday.

So far, holders of more than 50.1% of the first-lien bank claims have signed onto the agreement, according to an 8-K filed by the company this morning with the Securities and Exchange Commission.

The company said in its announcement that it continues “to engage in discussions with junior creditors to build additional support for the previously announced second-lien restructuring agreement in an effort to complete the restructuring consensually,” adding that the agreement with bank lenders “paves the way toward a confirmable plan for the restructuring of CEOC.” (See “Caesars nets revamp pact with ‘significant amount’ of CEOC 2L debt,” LCD, July 21, 2015, for a description of the second-lien restructuring agreement.)

In any event, Friday’s announcement comes a week after the company said in an earlier SEC filing that it had been unable to reach an agreement with the steering committee of bank lenders in the case (see “Caesars says it remains unable to reach deal with bank lenders,” LCD, Aug. 17, 2015, for a discussion of the issues that split the two sides).

The company said the agreement with bank lenders would, for the most part, track the current restructuring agreement in place between the company and its first-lien noteholders, albeit with certain adjustment to bank lender recoveries.

To review, under the current restructuring proposal CEOC would be split into an operating company and a REIT, which would hold ownership of CEOC’s properties. The new structure would be newly capitalized, in part, with roughly $1.6 billion of backing from CEC.

Among other things, the restructuring calls for bank lenders to receive $705 million in cash, $882 million in new first-lien debt to be issued by the contemplated operating company, $406 million of new second-lien debt to be issued by the contemplated operating company, $1.961 billion of new first-lien debt to be issued by the contemplated REIT, and up to $1.45 billion in additional cash or mezzanine debt to be issued by CPLV, a subsidiary of the REIT specifically created to hold the company’s properties located in Las Vegas.

According to today’s SEC filing, the company has now agreed to syndicate the new first- and second-lien debt to be issued by the contemplated operating company and pay an amount of cash equal to that new debt, $1.288 billion, to first-lien bank lenders.

In addition, in lieu of receiving CPLV Mezzanine Debt (as defined below), first-lien bank lenders will receive new second-lien debt in the maximum amount of $333 million to be issued by the contemplated REIT with a six-year term and interest at 8%.

Finally, on the date on which holders of 66.66% of bank claims have signed onto the agreement, or Sept. 8, whichever occurs first, CEC will make an upfront, pro rata payment of $62.5 million to bank lenders who sign onto the pact. Bank lenders agreeing to the restructuring will also be entitled to certain forbearance fees. – Alan Zimmerman