Caesars Entertainment Corporation (CZR) Falls on Bankruptcy Restructuring Details
Shares of Las Vegas, Nevada, based Caesars Entertainment Corporation (CZR) fell on Tuesday, against the backdrop of a solid advance in stocks overall. Caesar's stock was down 18.92%, falling $1.79 per share, to close at $7.67, on volume of 7.68 million shares. The stock fell on an announcement by the company that a preliminary agreement was reached on restructuring it's bankrupt subsidiary Caesars Entertainment Operating Company, which would leave current shareholders of Caesars Entertainment with just 6% of the new company.
Under the preliminary agreement announced on Tuesday, involving the restructuring of bankrupt subsidiary Caesars Entertainment Operating Company (CEOC) - which has been in bankruptcy since early 2015 - Caesars Acquisition Company (CACQ) will be acquired and the company will be restructured as "New CEC." The new company will be 70% owned by bondholders in CEOC and 24% owned by Caesars Acquisition Company shareholders. That will leave current stockholders of Caesars Entertainment with just 6% of the new company.
Both Caesars Entertainment and CEOC believe that the support received for the proposed consensual plan will allow CEOC to obtain the required creditor votes to confirm the plan. Confirmation would enable the conclusion of CEOC's bankruptcy proceedings sometime in 2017. It would also enable Caesars Entertainment and CEOC to move forward with a better capital structure.
If accepted, the definitive support agreements will include various conditions to their continued effectiveness. The Revised Plan of Reorganization must be filed with the bankruptcy court, and will be subject to a formal creditor vote and confirmation by the court. The completion of CEOC's restructuring under the Revised Plan of Reorganization will be subject to numerous conditions, including regulatory approval, completion of definitive documentation implementing the Revised Plan of Reorganization and the consummation of the merger between Caesars Entertainment and Caesars Acquisition.
Under the agreement, Hamlet Holdings - the entity through which funds managed by Apollo Global Management, LLC, TPG Capital, L.P. and certain co-investors (collectively, "Hamlet") hold their interest in Caesars Entertainment - will contribute 14% of the equity that it would have received through its ownership in Caesars Entertainment in the plan of reorganization currently on file. This contribution is valued by the Debtors at approximately $950 million.
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