Caesars restructuring plan coming undone as senior creditors get grabby

caesars-senior-creditorsEmbattled casino operator Caesars Entertainment is facing fresh pressure from an unexpected source as senior creditors voice objections to the company’s restructuring plan.

On Wednesday, Reuters reported that senior creditors that had been supporting Caesars’ plan to restructure its bankrupt main unit Caesars Entertainment Operating Co (CEOC) were now threatening to leave the company at the altar and file their own restructuring plan.

Caesars sought bankruptcy protection for CEOC last January while proposing a restructuring that would erase around $10b of CEOC’s $18.4b debt. Senior creditors supported this plan, largely because most of that $10b haircut would be shorn from the heads of junior creditors, who have launched numerous lawsuits to force Caesars to offer them better terms.

But Caesars’ efforts to mollify junior creditors don’t appear to be sitting well with senior creditors, who filed papers on Tuesday expressing their concern over the “very substantial decline in the value of the debt and equity securities proposed to be provided” to them.

This decline happened in October, shortly after Caesars lost its bid to quash those junior creditor lawsuits, which forced the company to sweeten its offer. Caesars has warned that if the parent company is forced to honor CEOC’s debts, it too will be forced to file for Chapter 11 protection.

This week’s filing by senior creditors in the Chicago bankruptcy court overseeing the CEOC debacle warns that if “sufficient progress toward a consensual plan is not made … a plan proposed by the first lien bank and noteholders becomes the most efficient means to allow [CEOC] to emerge in a timely manner from bankruptcy.”

In other words, Caesars’ attempts to please everyone are pleasing no one, and its efforts to make somebody – anybody – other than its primary hedge fund owners Apollo Global Management and TPG Capital Management bear the cost of its mistakes appear doomed. Basically, Caesars is now Arnold Schwarzenegger in those Mobile Strike commercials, except they’re doing a lousy job of protecting their alliance and Arnold’s check probably cleared.

Even worse could be coming before the month is through via the release of an independent examiner’s report into Caesars’ pre-bankruptcy asset transfers and refusal to honor debt obligations. Last month, insiders claimed that the report had concluded there was a “degree of civil fraud” to these transactions.