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Caesars says lawsuits raise 'going concern' doubts

18 Mar 2015

By Howard Stutz
LAS VEGAS -- Caesars Entertainment Corporation said in a securities filing late Monday the numerous lawsuits filed by bondholders over the bankruptcy restructuring of its largest operating division could “raise substantial doubt about (the company’s) ability to continue as a going concern.”

In the company’s year-end filing with the Securities and Exchange Commission, Caesars said the numerous lawsuits are related to transactions the company has made with its Caesars Entertainment Operating Co., going back to 2010.

Many of the claims against the CEOC “have been stayed” because the operating division was placed into a pre-packaged Chapter 11 bankruptcy in January in Chicago.

“At the present time, we believe it is not probable that a material loss will result from the outcome of these matters,” Caesars told investors in the filing.

However, Caesars said the lawsuit “could have a material adverse effect on our business, financial condition, results of operations, and cash flows.”

The language was the first time that Caesars, which has a gaming industry high $22.8 billion in long term debt, has used the “going concern” language.

Caesars said it believed the lawsuits “are without merit.” Most of the lawsuits involve second-tier noteholders who are challenging the bankruptcy and many of the steps Caesars took to restructure the business unit in the last few years.

“The noteholder disputes are in their very preliminary stages and discovery has begun on the unsecured note lawsuits,” according to the filing.

The restructuring of CEOC will reduce the division’s $18.4 billion debt load by almost $10 billion. Caesars is seeking court approval to convert CEOC into a publicly traded real estate investment trust. CEOC controls Caesars Palace, Caesars Atlantic City, Harrah’s Reno and more than a dozen regional properties.

The properties in the REIT will be leased for an annual payment of $635 million. Also, the restructuring will reduce CEOC’s interest payments from $1.7 billion to $450 million.

Many expect the bankruptcy to take up to a year to finalize.

Separately on Tuesday, the bankruptcy judge ruled CEOC could void several agreements because of the bankruptcy, including the lease for a luxury box at Arrowhead Stadium in Kansas City — home of the NFL’s Kansas City Chiefs — and a room reservation agreement it had with a Springhill Suites near the company’s Horseshoe Casino & Hotel - Bossier City in Louisiana.

The judge also allowed the company to void an agreement with audio company Monster Inc. over a dispute involving performer performer Britney Spears’s show at Planet Hollywood Resort & Casino.

Caesars was taken private by Apollo Global Management LLC and TPG Capital in a $30.7 billion leveraged buyout in 2008.

Shares of Caesars fell 23 cents, or 2.39 percent, to close on Tuesday at $9.39.

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