Cash-strapped Caesars division files for bankruptcy protection

An exterior view of Caesars Palace.

The main operating division of debt-ridden casino company Caesars Entertainment filed for bankruptcy early Thursday morning in Chicago, taking a long-planned step toward a major financial restructuring.

Caesars filed with the U.S. Bankruptcy Court for the Northern District of Illinois. If the restructuring plan put forward by Caesars is instituted, it would slash the operating division’s $18.4 billion debt by nearly $10 billion.

Caesars announced in December that the division — called Caesars Entertainment Operating Co., or CEOC — would file for bankruptcy after agreeing on the restructuring plan with certain senior creditors. And the company said last week that a crucial number of creditors were on board.

"We believe this restructuring is in the best interests of all of CEOC's stakeholders and will result in a sustainable capital structure for CEOC and value creation for all stakeholders,” said Caesars CEO Gary Loveman in a press release announcing the filing. “The restructuring of CEOC is the culmination of a years-long effort to improve the health of CEOC's balance sheet, which has included substantial investment in new and upgraded assets, especially in Las Vegas. I am very confident in the future prospects of our enterprise, which will combine an improved capital structure with a network of profitable properties."

But some creditors aren’t going along with the restructuring plan, which would convert the operating division into one part that owns casinos and another that runs them. Earlier this week, a group of hedge funds filed court papers attempting to force the company into bankruptcy proceedings in Delaware.

The hedge funds, who are junior creditors, told the Delaware bankruptcy court that Caesars was generally not paying its debts and requested an examiner to investigate assertions that insiders “plundered” away billions of dollars in value from the operating division. They also preemptively asked for a stay on Caesars’ filing, but the court denied that request on Wednesday.

A judge will now need to decide in which venue the Caesars bankruptcy proceedings take place. The junior creditors said in court papers that Delaware is appropriate because that’s where the operating division is incorporated; Caesars has justified choosing Illinois by pointing to the fact that it has properties there.

Caesars has struggled to manage its billions of dollars in debt since it was acquired in a leveraged buyout in 2008. The company has lost money for each of the last five years.

The only Las Vegas casino owned by the operating division is Caesars Palace. But the division manages other Caesars properties on the Strip, including the Flamingo, Paris and Planet Hollywood. And it owns or manages many more Caesars properties in additional locations.

Caesars has said business at its casinos will continue as usual throughout restructuring.