Bloomberg News

Caesars Creditor Arrowgrass Said to Weigh Options With Firm

June 23, 2014

Arrowgrass Capital Partners LLP, a $4.5 billion hedge fund that owns secured bonds of Caesars Entertainment Corp. (CZR:US), is in talks with law firm Brown Rudnick LLP exploring whether those securities have a more senior claim than others on cash from asset sales, said two people with direct knowledge of the matter.

Arrowgrass owns the casino operator’s 11.25 percent first-lien notes due in 2017 and has been discussing the company’s debt documents with Brown Rudnick to ascertain the standing of holders of those securities, said the people, who asked not to be named because the talks are private. There are $2.1 billion of the notes outstanding.

While more junior bondholders are seeking to sue the Las Vegas-based company over allegations that a $2.2 billion casino sale to an affiliate in March was a fraudulent transfer, the strategy Arrowgrass is exploring would involve negotiating with Caesars. The transaction prompted a group of creditors to send Caesars a notice of default on June 5.

Nick Lord, a spokesman for London-based Arrowgrass; Stephen Cohen, a spokesman for Caesars at Teneo Holdings; and Marcia Brier, a spokeswoman for Brown Rudnick at MCB Communications, all declined to comment.

Default Odds

Caesars was purchased in 2008 in a $30.7 billion leveraged buyout led by Apollo Global Management LLC (APO:US) and TPG Capital and is fighting with its creditors over the March deal that moved the Bally’s, Quad and Cromwell casino-hotels in Las Vegas, as well as Harrah’s New Orleans, from its operating unit to affiliate Caesars Growth Partners LLC.

The holders of Caesars’ 10 percent second-lien notes due in 2018 said the company defaulted on its obligations by transferring assets and by removing the parent company’s guarantee on the operating unit’s debt.

That group owns at least 30 percent of those $3.7 billion in notes outstanding, Caesars said in a June 6 regulatory filing. They are represented by Jones Day.

Moody’s Investors Service in March cut the credit rating of Caesars’ operating unit to Caa3, or three levels above default, saying the asset sale “significantly heightens” its odds of default and the likelihood that the casino company would undertake a distressed-debt exchange or go bankrupt.

The 11.25 percent notes rose 0.4 cent to 92.4 cents on the dollar at 12 p.m. today in New York to yield 14.5 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Lisa Baker, a spokeswoman for TPG at Owen Blicksilver Public Relations, Inc., and Fran McGill, a spokesman for Apollo at Rubenstein Associates, declined to comment.

To contact the reporter on this story: Laura J. Keller in New York at lkeller22@bloomberg.net

To contact the editors responsible for this story: Shannon D. Harrington at sharrington6@bloomberg.net Caroline Salas Gage

Arrowgrass Capital Partners LLP, a $4.5 billion hedge fund that owns secured bonds of Caesars Entertainment Corp., is in talks with law firm Brown Rudnick LLP exploring whether those securities have a more senior claim than others on cash from asset sales, said two people with direct knowledge of the matter.

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Companies Mentioned

  • CZR
    (Caesars Entertainment Corp)
    • $16.84 USD
    • -0.14
    • -0.83%
  • APO
    (Apollo Global Management LLC)
    • $27.36 USD
    • -0.26
    • -0.95%
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