Harrahs Entertainment and its purchasing entity, Harrah’s Acquisition Corporation, have modified the conditions of their amalgamation contract. This pact, originally declared in December 2014, is linked to the enormous $18 billion insolvency and reorganization of Harrahs Entertainment Operating Corporation (HEOC), the primary operational division of Harrahs Entertainment.
HEOC declared Chapter 11 bankruptcy protection in January 2015 after struggling beneath a substantial debt burden. This action followed a US bankruptcy magistrate’s decision to permit HEOC to begin soliciting creditor backing for a strategy to restructure its debt and ultimately emerge from bankruptcy. This procedure commenced back in June 2014.
A reorganization blueprint, presented in October 2015, suggested that HEOC would diminish its debt by $10 billion. It also delineated a scheme for HEOC to separate into two bodies: a fresh operating company and a real estate investment trust. This strategy, naturally, depended on obtaining endorsement.
It is anticipated that the capital generated from the amalgamation of Harrahs Entertainment and Harrah’s Acquisition Corporation will be utilized, partially, to reimburse some of HEOC’s lenders.
Reuters, referencing regulatory documents, indicated that the amended terms would result in shareholders of Harrah’s Acquisition Corporation possessing 27% of the unified company, reduced from the original proposition of 38%.
In a public announcement, Caesars Entertainment declared that the revised merger contract represents a major accomplishment in the CEOC reorganization, primarily because the restructuring relies heavily on elements such as the successful finalization of the merger.
Both Caesars Entertainment and CEOC are hopeful about the recent advancements achieved in discussions with significant creditor factions. They’ve conveyed appreciation for the backing received up to this point for the CEOC reorganization strategy.
Nevertheless, it’s important to acknowledge that Reuters has indicated potential obstacles to the CEOC restructuring strategy. These hurdles could originate from subordinate creditors who assert that Caesars Entertainment and its private equity investors, Apollo Global Management and TPG Capital, are indebted to them a substantial amount, potentially reaching as high as $12 billion.
Further complicating matters, a provisional injunction against legal actions targeting Caesars Entertainment is scheduled to terminate in August. Subordinate bondholders have contended in court that judgments favoring bondholders could endanger their contributions to the restructuring strategy. They are convinced such judgments might even propel both them and CEOC nearer to insolvency.
The confirmation hearing for the CEOC reorganization strategy is slated for January 17, 2017.