Maryland regulators to meet with Caesars after unit files for bankruptcy
Staff and wire reports|
Jan 15, 2015 at 7:14 PM
State regulators said Thursday that they will be closely following Thursday's bankruptcy filing by a cash-strapped division of casino giant Caesars Entertainment Corp. to ensure that operations at Horseshoe Casino Baltimore remain stable.
The division, Caesars Entertainment Operating Co., filed for bankruptcy protection in Chicago, hoping the court agrees to its plan to get out from under $18.4 billion in debt.
CEOC does not hold an ownership stake in the Baltimore casino but manage its day-to-day operations under a contract.
"Our chief priority during this process will be to ensure that Horseshoe Casino Baltimore's operations are stable, safe, secure and transparent," said Stephen Martino, director of the Maryland Lottery and Gaming Control Agency, in a prepared statement. "We will meet with Caesars management soon and continue to give this matter the attention that it deserves."
Caesars Entertainment Operating Co. owns and operates many of Caesars' 50 properties worldwide. Caesars CEO Gary Loveman said in a statement that its casino-hotels would remain open and continue to host meetings and events, assuring customers that their loyalty points would still accrue and the company's lineup of onstage entertainers would perform according to their schedules.
Company officials say they intend to continue paying employees and suppliers in full.
"I am very confident in the future prospects of our enterprise, which will combine an improved capital structure with a network of profitable properties," Loveman said in the statement.
The bankruptcy filing doesn't apply to parent company Caesars Entertainment Corp. and affiliated companies Caesars Entertainment Resort Properties and Caesars Growth Partners. Caesars Growth Partners owns nearly 41 percent of the $442 million Horseshoe Baltimore, which opened in August. Detroit-based Rock Gaming owns 29 percent, and other investors own the balance.
Horseshoe reported $22.9 million in revenue from slot machines and table games in December, down about 2 percent from November. The casino's revenues have been about one-third lower than projected by state consultants. Casino officials say it's still becoming accustomed to the market, and vice versa.
Martino said his agency and the Gaming Control Commission "have been closely following Caesars Entertainment Operating Company's financial condition since its Maryland gaming license was awarded in 2012. The commission's audit committee is consistently briefed on the issue, and agency staff, including auditors and financial investigators, is in constant contact with Caesars representatives."
The filing by Caesars Entertainment Operating Co. in a Chicago bankruptcy court came as no surprise.
The company has been weighed down by sizable debt ever since Apollo Global Management LLC and TPG Capital LP and other investors bought the casino giant in January 2008 for $30.7 billion, using $6.1 billion of their own cash and financing the rest with $24.7 billion in debt.
Burdened with debt payments, Caesars has lost money in each of the past five years. It's been negotiating with creditors and lenders for months on a reorganization plan that would turn the bankrupt division into a real estate investment trust — with one entity owning properties and another leasing them — promising creditors cash or new debt.
Not everyone is on board, though, including three junior creditor hedge funds owed $41 million that contend the plan isn't fair. In a bid to secure more favorable terms, they filed a petition Monday in Delaware's federal court to force the division into involuntary bankruptcy.
Caesars Entertainment Operating Co.'s own filing Thursday could set off a "sideshow" of jurisdictional wrangling to decide where the case would be heard, Delaware or Illinois, said University of Michigan law professor John Pottow.