Post-Bankruptcy―All Hail Caesars

The gaming giant’s largest subsidiary is out of bankruptcy and freed of most of its debt. There’s a new slate of directors in place and confidence in the board room that one of the industry’s great conglomerates is positioned to grow again, and in a big way. CEO Mark Frissora (l.) said the company could now “unlock new growth opportunities.”

Its indebted past behind it, Caesars Entertainment is looking to a future rich with growth―$2 billion worth, to be exact.

“With reduced leverage, increased free cash flow and the new REIT structure, we are positioned with a solid foundation to pursue a diversified growth strategy,” CEO Mark Frissora said last week in announcing the long-awaited emergence from bankruptcy of the gaming giant’s largest subsidiary, Caesars Entertainment Operating Co.

The announcement coincided with the introduction of a new board of directors under a new chairman, James Hunt, a 10-year Walt Disney Company veteran.

Hunt, for his part, praised Caesars’ “strong brands, first-class properties and talented people” and said, “I am committed to working tirelessly with our board colleagues and our management team to drive long-term value creation.”

Next up, Frissora said, is execution on a corporate-wide strategy “to unlock new growth opportunities,” underlying which is the successful restructuring of CEOC, which took two years of difficult give and take with lenders under the supervision of U.S. Bankruptcy Court.

CEOC voluntarily filed for Chapter 11 protection in January 2015, buried under more than $18 billion of debt, a legacy of the 2008 leveraged buyout of Harrah’s Entertainment by private equity giants Apollo Global Management and TPG Capital.

The agreement that was finally hammered out and approved by a bankruptcy judge in Illinois earlier this year eliminates roughly $10 billion of CEOC’s debt, principally by giving creditors majority ownership of its 21 resorts through a newly created real estate investment trust, VICI Properties. As part of the agreement, Caesars Entertainment is merging with its Caesars Acquisitions Co. affiliate, which will be 32 percent owned by CEOC’s lenders. The enlarged parent, consisting of 26 U.S. and international resorts, will be VICI’s sole tenant and operate and manage the REIT portfolio.

The conglomerate will still carry more than $9 billion of debt, a vast improvement over the $25 billion-plus it carried prior to the bankruptcy filing, and it now boasts an enterprise value of approximately $20 billion, including the $2 billion cash war chest.

Frissora, who guided the company through most of the bankruptcy, remains an executive member of the board. Along with Hunt the other new directors joining him are: Thomas Benninger, John Boushy, John Dionne, Matthew Ferko, Don Kornstein, David Sambur, Richard Schifter, Marilyn Spiegel and Christopher Williams.

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