Saturday, October 8, 2016

Caesars Entertainment bankruptcy outcome

In September 2016 Caesar's Entertainment entered a final agreement for its bankruptcy exit. Creditors of the bankrupt operating unit would own almost 70 percent of the new company. In exchange for the much better offer, the junior bondholders would be required to drop any legal claims against Apollo and TPG, which they had previously sued for $13 Bn.

 "After more than a year of standing firm, Apollo and TPG caved to creditors demands and forked over more cash as part of Caesars’ Chapter 11 reorganization plan — and gave [junior] bondholders an equity stake in the casino’s non-bankrupt unit.  
 The move means investors in the PE giants’ funds will see their return on investment slashed — to about 27 cents on the dollar for some." (NY Post, Oct. 3rd, 2016)

         Owners Apollo and TPG lost $6 Bn they sunk into the 2008 buyout

"Apollo’s Fund VI, raised in 2006, has met expectations by generating an 8.8 annual internal rate of return, or IRR, according to the California Public Employees’ Retirement System. TPG’s fifth fund lags with a 3.8 annual IRR as of March 31." (NY Post)

The junior creditors (also known as second lien creditors), led by aggressive hedge funds such as Appaloosa Management and Oak Tree Capital will get about 66 cents on the dollar, or seven times what they were first offered (NY Times). Apollo and TPG will be left with a less than 10% stake in the reorganized company.

Kirkland & Ellis LLP represents CEOC in the $18 billion bankruptcy.

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