Troubled US casino operator Caesars Entertainment dodged a bullet on Thursday after Illinois gaming regulators approved the company’s latest refinancing plan. Some holders of Caesars’ industry-high $24b debt load had grown suspicious of Caesars’ asset shell game, which appeared to be a ploy to protect its more profitable operations from what many view as inevitable bankruptcy and restructuring. In June, these creditors hit Caesars with a notice of default and attempted to convince gaming regulators in Illinois – where Caesars operates two casinos – to block the company’s plan to raise $1.75b in new debt to facilitate its asset transfer.
On Thursday, the Illinois Gaming Board heard from Jones Day attorney Sidney Levinson, who spoke on behalf of the disgruntled creditors. Levinson told the Board that Caesars’ refinancing plan would “ultimately pave the road for [Caesars parent company’s] bankruptcy rather than forestall it.” Levinson insisted that the plan would add to Caesars’ interest burden and pleaded with the Board to “stop the endless shell game” Caesars was attempting to pull off.
Sadly for Levinson and his clients, the Board approved Caesars’ refinancing plan. Caesars CEO Gary Loveman (pictured) celebrated the ruling, saying the company could now “get on with the work of improving [the parent company’s] capital structure.” Easier said than done, as Moody’s currently rates Caesars’ debt at nine levels below investment grade.
Caesars isn’t quite out of the financial woods, as this week saw New York’s Department of Financial Services (DFS) express concern over the possibility that Caesars’ debt could contaminate life insurance firm Athene Holding. Hedge fund giant Apollo Global Management has significant stakes in both firms and DFS superintendent Benjamin Lawsky is worried that policyholders’ money could be used to shore up Caesars’ shaky foundation by having Athene buy Caesars bonds. The timing of Lawsky’s inquiry isn’t optimal, as Caesars is aggressively pursuing one of the four new casino licenses up for grabs in New York state and continued questions surrounding its survivability won’t help.