Caesars improves restructuring offer but junior creditors appear unimpressed

caesars-bankruptcy-offerStruggling casino operator Caesars Entertainment Corp (CEC) has amended the restructuring plan for its bankrupt main unit by promising creditors an extra $2.5b.

For over a year now, CEC has been attempting to convince creditors to agree to the restructuring of Caesars Entertainment Operating Co (CEOC), which listed $18.4b in debt when it filed for Chapter 11 protection in January 2015.

CEC had proposed a restructuring that would have cut $10b off CEOC’s debt, but junior creditors weren’t buying what CEC was selling, convinced that their lawsuits over CEC’s controversial pre-bankruptcy asset transfers would force CEC to make things right.

On Wednesday, CEC amended its restructuring plan, promising to contribute $4b to the plan, $2.5b more than the parent company had originally offered, but still less than the $5.1b legal liability that an independent examiner has concluded CEC could face due to those asset transfers and other fiscal shenanigans.

CEC’s latest plan further complicates the alphabet soup of subsidiaries the company has created in order to obfuscate the extent of its chicanery. CEC says that its previously announced plan to (re)merge with Caesars Acquisition Company (CACQ), which was created in 2013 to hold CEC’s more profitable assets, will result in a company called New CEC.

Under the new restructuring plan, CEOC creditors will receive $1b of convertible notes issued by New CEC, as well as up to 47.5% of common stock in New CEC.

The new plan continues to treat senior creditors favorably, while junior bondholders are looking at recovering anywhere from 22% to 48% of their claims via a combination of cash, debt and equity. General unsecured creditors who accept CEC’s latest offer could receive up to 46% of their claims, or as little as 30% if they reject the offer.

The US Bankruptcy Court in Chicago saddled with unweaving CEC’s tangled web has scrapped a hearing scheduled for May 25 in order to study the new offer. A new hearing has been scheduled for June, and only after the court determines that the offer is appropriate will creditors have the opportunity to vote on it.

Wednesday’s hearing was the first time junior creditors heard specifics on CEC’s latest offer, and they didn’t seem all that impressed. CEC attorney David Seligman told the court that the new offer to creditors had been “substantially improved down the line” and that “all the blanks are filled in,” but Sidney Levinson said his clients Oaktree Capital and Appaloosa Management “have a different view.”

Junior creditors are pursuing lawsuits in Delaware and New York aimed at proving the illegality of CEC’s asset transfers, a path that creditors believe will produce a far more equitable return. CEC, which has made its latest offer conditional upon creditors dropping these lawsuits, has warned that if it is held liable for CEOC’s debts it will likely also have to file for Chapter 11.