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Caesars reaches agreement with creditors over restructuring of bankrupt unit

CaesarsEntertainment Corp. has reached an with most of the creditors ofits bankrupt subsidiary to effect a Chapter 11 restructuring of the unit.

Caesars and the unit, Caesars Entertainment Operating Co.,or CEOC, are working with representatives of the major creditors to completedefinitive support agreements and amendments to CEOC's currentreorganization plan to incorporate the changes. Caesars is"optimistic" that the support it has received from creditors willallow CEOC to obtain the necessary votes to confirm the revised restructuringplan, which must ultimately be approved by a bankruptcy judge.

The agreement also contemplates the voluntary staying ofongoing creditor litigation against Caesars and CEOC and releases all pendingand potential litigation against related third parties, Caesars Entertainmentand CaesarsAcquisition, with which Caesars Entertainment is in the process ofmerging.

Hamlet Holdings, the entity through which Apollo GlobalManagement LLC, TPG Capital LP and certain co-investors hold their stake inCaesars, will contribute all of the Caesars equity it would have received underthe existing restructuring plan, which is valued at approximately $950 million,to help fund the agreement.

Under the revised restructuring plan, first-lien banklenders will receive approximately 115 cents on the dollar, down one cent fromthe amount outlined in the previous plan thanks to a $66 million reduction incash distributed under the plan.

First-lien note holders will receive 109 cents on thedollar, the same amount they were to receive under the previous plan. They willalso receive a $142 million fixed-cash payment in exchange for waiving theirright to certain excess cash to be paid under a separate court order. This willresult in a $79 million net reduction in cash received by the first-lien noteholders, based on CEOC's projections.

Second-lien note holders, meanwhile, will see theirrecoveries increase by 27 cents on the dollar over the previous plan's payment,to 66 cents on the dollar. This is due to $345 million in cash, 14.6% of thefully diluted equity in the new company formed after the pending merger ofCaesars Entertainment and Caesars Acquisition closes, and a $108 millionincrease in convertible notes in the new company.

Subsidiary guaranteed note holders will see their recoveriesdip by 1 cent, to 83 cents on the dollar due to a less than 0.1% reduction inequity in the post-merger Caesars.

Finally, unsecured creditors will receive 66 cents on thedollar. The amount received will comprise cash and increased amounts of equityand convertible notes in the new Caesars.

Based on the revised plan, CEOC creditors will ownapproximately 70% of the new Caesars, while Caesars Acquisition shareholderswould own 24% and existing shareholders of Caesars Entertainment will retain 6%of the equity.