Leon Black’s Apollo Global Management LLC and Paul Singer’s Elliott Management Corp. are in a bitter fight over Caesars Entertainment’s $25 billion debt. While Apollo wanted to preserve its ownership stake in Caesars, Elliot Management was loath to accept less than it’s owed on Caesars’ loans.
Caesars Entertainment’s latest deal
As reported by ValueWalk, Paul Singer’s Elliot Management sought an earlier Chapter 11 bankruptcy for Caesars Entertainment Corp. through a lawsuit. The activist hedge fund owns a huge credit-default position in a subsidiary of Caesars Entertainment Corp., which is owned by Apollo Global Management and TPG Capital. Market observers believed Elliot would make a huge profit if the company entered a chapter 11 bankruptcy before Dec. 19, the expiration date of its credit-default position. An earlier filing will allow Elliott to cash in on its bond and CDS investments in the company, however.
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Las Vegas-based Caesars Entertainment announced Monday its all-stock merger agreement with Caesars Acquisition Company to create one of the largest gaming and entertainment companies worldwide.
The latest move comes soon after Caesars Entertainment Operating Company had reached an agreement with creditors to file for Chapter 11 bankruptcy in January. David Gelles of DealBook notes that for creditors, the latest move is good news, as it will bring several of the best Caesars properties back into the parent company and avoid the assumption of more debt.
Black Vs Singer in the showdown
Black’s Apollo Global Management LLC and TPG Capital acquired Caesars Entertainment Corp in a 2008 leveraged buyout. Las Vegas-based Caesars is burdened by lackluster properties and $25.5 billion in debt. Black and Singer’s Elliott Management Corp have been battling over the fate of Caesars Entertainment Corp.
On Dec. 19, Apollo signed a tentative pact with Elliott and other creditors. The parties had to overcome clashing agendas and an acrimonious history. Citing people familiar with the developments, Laura J. Keller, Linda Sandler and David Carey of Bloomberg say the ill will between them was so great that when Apollo held a pivotal negotiating session at its office in Manhattan, it didn’t invite Elliott.
Fran McGill, a spokesman for Apollo, termed the deal “a significant step in Caesars’ ongoing efforts to create a sustainable capital structure” that will “ensure the best outcome for all stakeholders.”
According to an Aug. 4 legal complaint by a group of creditors, last year Apollo and TPG formed a new company, Caesars Growth Partners LLC, and used it to buy some of the few profitable pieces of Caesars Entertainment.
The latest agreement envisages Caesars putting Caesars Entertainment Operating Co., its largest unit, into bankruptcy no earlier than Jan. 15 and no later than Jan. 20 and convert itself into a real estate investment trust. As part of the agreement, holders of its $18.4 billion in debt, including Elliott, would get cash, securities and equity in the new unit in exchange for reducing their claims, and the parent company would provide as much as $1.45 billion in cash. To proceed into bankruptcy, Caesars should get consent from 60% of its bondholders by Jan. 5.