Debt-laden casino operator Caesars Entertainment could declare bankruptcy as soon as mid-January, as suggested by a new filing with the US Securities Exchange Commission (SEC). According to the Thursday filing, Caesars Entertainment Operating Company (CEOC) has “entered into certain control arrangements … to provide the first lien secured creditors with a perfected lien on its cash.”
CEOC is the main division of Caesars, which also holds the bulk of Caesars’ crushing $24b debt. Caesars is currently holding restructuring talks with its senior creditors and CreditSights Inc. analyst Chris Snow told Bloomberg that Thursday’s filing was necessary for these talks to move forward.
For the past year or so, Caesars has been frantically transferring its more profitable assets – including many of its marquee brick-and-mortar casino properties as well as its online gambling and social gaming operations – out of CEOC and into a variety of other subsidiaries. It’s like Noah realized the ark was sinking, so he transferred the cows, horses and pigs into lifeboats and sailed away, leaving the platypuses, dodos and aardvarks behind for any would-be salvage parties.
The moves are the subject of multiple legal challenges by Caesars’ creditors, especially second-lien debt holders, who fear they will be left with nothing when Caesars finally admits the game is up and files for Chapter 11 bankruptcy protection. Caesars has already taken steps to neutralize these challenges by striking a deal with senior creditors that gives them first dibs on any cash realized via these lawsuits.
The timing of Thursday’s filing could be significant. On Dec. 15, Caesars has to make $225m in interest payments on $4.5b of its second-lien notes. The company’s first-lien creditors would presumably not want Caesars to part with that cash, especially if it’s going to that second-lien riff-raff. If Caesars were to miss that payment, it would have 30 days in which to remedy the situation or be ruled in default. That default notice would come three months from today, which corresponds with rules requiring liens on cash to be made at least 90 days before filing for bankruptcy protection. Et tu, Caesars?