Funds have ‘cake and eat it too’ in Caesars case

Owners keeping part of investment despite bankruptcy

WILMINGTON, Del. — Caesars Entertainment Corp. delivered an unusual bounty to its private equity owners when it struck a $5 billion deal to exit its casino operating unit’s costly bankruptcy: They keep part of their investment.

Under the proposed agreement, shareholders Apollo Global Management and TPG Capital Management LP could emerge with a 16 percent than fair value and placed beyond the reach of creditors, who were stuck seeking repayment from a hollowed-out CEOC, according to Davis.

Davis said the memo showed that the private equity firms feared losing their entire investment and were trying “to improve their position vis à vis CEOC’s creditors in the event of a restructuring.”

Davis concluded the private equity firms and the Caesars parent faced up to $5.1 billion in damages for the asset transfers. Creditors, led by deep-pocketed and aggressive hedge funds such as Appaloosa Management called it “looting,” and were pursuing $13 billion in damages in several courts.

Appaloosa and its allied creditors agreed to drop those lawsuits as part of last week’s deal. The settlement essentially puts the family of hotels and casinos back under one roof by merging the affiliates that Rowan created, including Caesars Acquisition Corp., with the Caesars parent.

The deal is subject to approval from the U.S. Bankruptcy Court in Chicago. One small hedge fund still opposes the proposed deal.

JASON OGULNIK/LAS VEGAS REVIEW-JOURNAL The Linq resort on the Strip was acquired by Caesars affiliates, partly funded by private equity firms, from the debt-burdened Caesars Entertainment Operating Co.