Largest Unit Of Gambling Giant Caesars Files For Bankruptcy
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Caesars is one of the biggest names in the casino business. Today, it placed its largest division, Caesars Entertainment Operating Company, in bankruptcy. The company's perhaps best known for the sprawling Caesars Palace resort at the center of the Las Vegas Strip. But it also operates Bally's in Atlantic City and Harrah's casinos around the country. NPR's Yuki Noguchi reports that the company has been awash in debt ever since the financial crisis in 2008.
YUKI NOGUCHI, BYLINE: The story of Caesars' road to bankruptcy isn't exactly straightforward or simple.
ADAM LEVITIN: Bankruptcies are often messy. But this is - this is an especially messy one.
NOGUCHI: Adam Levitin teaches bankruptcy law at Georgetown University. He says this case pits Caesars' private equity owners against its hedge fund creditors. The company accused its creditors of pushing it toward failure so they could collect on insurance or credit default swap payments.
LEVITIN: The full story is basically a private equity versus hedge fund fight. So that's always going to be a pretty good catfight.
NOGUCHI: The sides are even dueling over where the bankruptcy should proceed. Earlier this week, Caesars' creditors preempted the company by filing an involuntary bankruptcy petition in Delaware. Today, the company filed its own voluntary petition in Chicago.
LEVITIN: Involuntary bankruptcy petitions are pretty rare. And dueling petitions is even rarer.
NOGUCHI: The seeds of this fight go back to just before the financial crisis, when two private equity firms, Apollo Global Management and TPG Capital, borrowed massively to buy the company, saddling it with over $20 billion in debt. Gaming traffic fell off dramatically during the crisis. Atlantic City suffered, and Caesars' bid to get a gaming license in Macau, the world's largest gambling market, didn't pan out. The company has lost money four years in a row. And its debts have ballooned. Through bankruptcy, the company wants to split off its biggest unit, Caesars Entertainment Operating Company, or C.E.O., and divide it into two parts. One would operate the casinos, and the other would separately manage its real estate. David Skeel is a bankruptcy law professor at the University of Pennsylvania. He says bankruptcy inevitably creates losers. And in this case, the less senior creditors are clearly dissatisfied with the proposed division of assets and their share of the new ownership.
DAVID SKEEL: What often happens when you do this kind of a division is one of the companies - and it's often the real estate company - ends up with a lot of debt. And the other one ends up with a lot less debt.
NOGUCHI: But the company is defending its proposal. In a video statement today, CEO Gary Loveman characterized the deal as fair and would allow the company to emerge from its heavy burden of debt.
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GARY LOVEMAN: The restructuring plan will significantly reduce the amount of money C.E.O. spends every year paying interest on the debt and paying down the debt.
NOGUCHI: In Caesars' hometown of Las Vegas, bankruptcy attorney Jim Shea says the news isn't causing alarm.
JIM SHEA: Out here, we're really not any stranger to having casinos file bankruptcy.
NOGUCHI: Shea is president-elect of the American Bankruptcy Institute. He says in the past, bankrupt casinos operated without disruption.
SHEA: Most customers, I don't even know that they realize that somebody has filed bankruptcy.
NOGUCHI: Caesars says reservations, loyalty programs, business conventions and employee payments will face no interruption. Yuki Noguchi, NPR News, Washington.
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