Apollo said to get Caesars creditor demand to abandon parent
NEW YORK - Apollo Global Management, one of the owners of Caesars Entertainment, received an ultimatum from creditors who are the staunchest opponents of the casino operator's bankruptcy plan, demanding the private-equity firm surrender control of the still-solvent parent company to them.
The opponents, junior bondholders of Caesars' bankrupt unit, made their forfeiture demand in a meeting this month, according to two people with knowledge of the matter. Through the parent, creditors would then take charge of several profitable units outside of the bankruptcy case.
In exchange, the creditor group would withdraw the pile of lawsuits it's filed related to the bankruptcy, said the people, who asked not to be identified because the talks are private. Apollo rejected the offer, and the two sides are continuing negotiations, they said.
The second-lien group includes Appaloosa Management, Oaktree Capital Group LLC and Tennenbaum Capital Partners, according to a February court filing.
The junior creditors' proposal would wipe out much of the $4.4 billion that Apollo, TPG Capital and co-investors put into the casino company's $30.7 billion buyout, which was struck before the credit crisis unfolded in 2008. Apollo and TPG injected at least $600 million into Caesars Growth Partners LLC, a profitable unit owned by the parent that runs a group of casinos spun out of the company in 2013.
The offer was the opening line in a new round of talks among second-lien bondholders represented by Jones Day and Houlihan Lokey Inc., Caesars itself, and Apollo, the lead negotiator in talks to restructure Caesars Entertainment Operating Co. Divisions between the parties had become increasingly toxic in the eight-month-old bankruptcy as Caesars has gained support from other junior creditors while the second- lien group ramped up efforts to circumvent the company's reorganization plan.
Charles Zehren, a spokesman for Apollo at Rubenstein Associates, didn't respond to telephone and email messages seeking comment. Emily Wofford, a spokeswoman for Caesars, Luke Barrett, a spokesman for TPG, and John Gallagher, a spokesman for Houlihan, declined to comment. Dave Petrou, a spokesman for Jones Day, didn't return messages.
Caesars and its private-equity majority owners have been seeking support for a plan to turn the bankrupt subsidiary into a real estate investment trust and cut its $19.9 billion of debt in half. The parent put the unit into bankruptcy in January.
The private-equity firms have already agreed to give up more of their ownership stakes in the parent than when the first version of the reorganization proposal was filed in the bankruptcy. Caesars last month wooed some second-lien bondholders into signing onto its restructuring deal by offering them as much as $400 million of notes that can be converted into equity of the parent.
Unless amendments are made, that agreement will expire on Sept. 18 if Caesars fails to get least 50.1 percent of second- lien holders to sign on, according to a copy of the agreement included in a July 21 regulatory filing.
The biggest of Caesars' second-lien bonds, $3.6 billion of 10 percent notes due in December 2018, fell 0.3 cent to 32 cents on the dollar on Friday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. They reached their highest closing level in a year - 32.3 cents - on Aug. 5.