Caesars Entertainment Corp. (CZR:US) won approval for a $1.75 billion refinancing from Illinois casino regulators over the objections of some bondholders.
A representative of some debtholders told the Illinois Gaming Board today that Las Vegas-based Caesars was putting the finances of its largest unit, Caesars Entertainment Operating Co., in jeopardy by shifting casino assets to other subsidiaries and stripping away a guarantee of their debt.
“The financing transaction will, in our view, ultimately pave the road for CEOC’s bankruptcy rather than forestall it,” said Sidney Levinson, a Jones Day attorney in Los Angeles who represents holders of more than $1 billion of the unit’s second-lien notes. “The Illinois Gaming Board has a chance to stop the endless shell game that’s being played by Caesars.”
Caesars, the largest owner of casinos in the U.S., has two properties in Illinois, giving regulators there authority over some transactions. The company has struggled to cope with a slowdown in gambling and a debt load of more than $23 billion, the result of a 2008 leveraged buyout led by Apollo Global Management LLC (APO:US) and TPG Capital.
The refinancing will increase the interest burden at Caesars Entertainment Operating Co. and result in less investment in its casinos, Levinson said. He also predicted lower tax revenue for the state and possible casino closures.
Caesars Chairman and Chief Executive Officer Gary Loveman said in an interview after the board’s approval that the refinancing was oversubscribed, supported by “essentially every constituent” and approved in all jurisdictions.
“Now we can get on with the work of improving CEOC’s capital structure,” Loveman said.
Caesars fell (CZR:US) 0.8 percent to $16.84 at the close in New York. The stock is down 22 percent this year.
The operating company’s 10 percent notes dues in 2018 rose 1.1 cents on the dollar to 37 cents, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They traded at 35 cents on July 15, the lowest since January 2010.
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