Fifteen U.S. lawmakers are now up in arms against Caesars Entertainment Corp.’s real estate investment trust (REIT) plan, which will provide the beleaguered gaming and entertainment firm a favorable tax treatment, Reuters reported.
In a letter dated May 26, the legislators cautioned Treasury Secretary Jacob Lew from approving Caesars’ REIT plan, saying that doing so would amount to giving the bankrupt gaming firm a taxpayer subsidy.
The letter, according to the news outlet, was signed by 14 Democrats and one Republican, Representative Frank LoBiondo, who represents Atlantic City, New Jersey, where Caesars owns the Bally’s and Caesars casinos. An affiliate of Caesars also owns a Harrah’s casino in Atlantic City.
“The REIT would effectively shelter a considerable portion of the casinos’ profits, thus functioning as a taxpayer-funded subsidy to one of the largest casino companies in the U.S. and its private equity owners,” the US lawmakers said in their letter to Lew.
Caesars, sought chapter 11 protection in January 2015 with some $18 billion in debt. The company also applied for the so-called private letter ruling from the Internal Revenue Service to confirm that the REIT would be treated as a tax-free separation last year.
In its application, Caesars warned that it could post significant liabilities which, in effect dent the value of the gaming firm’s reorganization should it fails to get tax free status. Caesar also revealed its plan to create a trust to own its hotels and resorts.
The U.S. lawmakers, however, feared that the REIT structure could be used by to sidestep antitrust review.
Reuters sought the comment of Caesars and the Treasury Department on the issue but both declined to issue a statement.
Oaktree cautions Congress vs. Back-Room Deal on Caesars Debt
Meanwhile, Oaktree Capital Group LLC has urged the U.S. Congress to turn down any secret deals with Washington, which aim to shield private equity firms Apollo Global Management and TPG Capital from junior bondholder claims in connection with Caesars bankruptcy.
Oaktree, according to the report of Bloomberg, expressed concern that the legislators might agree to amend the Trust Indenture Act (TIA), a Depression-era law meant to protect the rights of bond investors, and add a provision that will codify Congressional intent narrowly and retroactively instead of interpreting the law broadly.
Caesars and its owners want new legislation to counter a court ruling they say distorts the act’s original intent and gives holdout bondholders too much power in restructuring talks. The gaming firm argued that the broader interpretations could empower just one or two small and disruptive bondholders to the detriment of the “held up” company, its employees, customers and other bondholders.
