Caesars weighs up sale of interactive subsidiary as legal battle intensifies

Caesars Entertainment CEOC
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Casino giant Caesars Entertainment, which remains embroiled in a bankruptcy battle with the creditors of its operating company (CEOC), is now considering selling its $800m-a-year interactive division to an unknown bidder for more than $4bn.

 

[dropcap]A[/dropcap]n affiliate of Caesars Entertainment, one of the largest online and land-based casino companies in the US, is contemplating selling its rapidly growing interactive division after receiving a series of unsolicited bids in excess of $4bn (€3.6bn).

According to the Wall Street Journal, the company is working closely with investment bank Raine Group LLC to analyse the offers, which are said to have come from other gaming, media and entertainment companies as well as financial firms.

But Mitch Garber, the CEO of Caesars Acquisitions, said it was still possible that no deal would take place. “We want to hear what people have to say,” he told reporters.

The news comes shortly after the release of Caesars first quarter results, in which it was revealed that CIE’s revenues had soared by 28.8 percent year-on-year to $228m (€204.4m), while adjusted EBITDA grew by 41.3 percent to $89m (€79.8m). In the company’s full-year results, the social, online and mobile gaming leg of the business saw sales swell to almost $800m (€717m).

After news of a potential CIE acquisition, shares in Caesars Acquisitions shot up by nine percent – a sign of continued scepticism about the future of iGaming in the United States. But according to Garber, the social gaming segment of the interactive business – which includes popular titles such as Slottomania and Bingo Blitz – earns the company substantial amounts of money through a ‘Candy Crush’-style model in which players pay small sums to progress through the levels.

CIE is also an attractive prospect on account of its ownership of the World Series of Poker, the most prestigious live poker festival on the planet.

A sale is likely to cause further legal difficulties between the creditors of CEOC – the operating unit that filed for bankruptcy last year – and Caesars Entertainment in an ongoing legal battle over unsettled debts. Stakeholders and creditors have accused the firm of deliberately disposing of its most valuable assets in a complicated restructuring that was carried out just months before the firm commenced bankruptcy proceedings.

One of the moves Caesars Entertainment took as part of its 2013 restructure was to group its interactive business along with other assets into a unit called Caesars Growth Partners (CGP), and establish a subsidiary called Caesars Acquisitions Co to take control of CGP. This meant that while Caesars Entertainment owns majority stakes in CGP and CIE, it doesn’t have voting rights within the unit.

Caesars claims that its actions prior to the bankruptcy all followed the letter of the law and, most recently, offered to settle with its creditors for $4bn (€3.6bn) – a significant jump up from the $1.5bn (€1.34bn) it had promised earlier. But stakeholders in CEOP have alleged that the bankrupt unit is refusing to pursue up to $18.4bn (€16.5bn) in potential debts from its parent company.

“The debtors, who remain under the control of many of the same individuals who have been identified by the examiner as wrongdoers and potential defendants, have taken no action to pursue claims against any of those entities,” said the official committee of second-lien bondholders, which represents a group of CEOP bondholders owed more than $5bn.

The group of stakeholders is awaiting a decision from a Chicago judge on whether they have grounds to sue the company for damages.

Meanwhile, at the recommendation of its Strategic Alternatives Committee, Caesars has appointed Judge Robert E. Gerber – an expert in large and complex bankruptcy proceedings – to help settle the ongoing disputes between the company and its subsidiary.

“Caesars Entertainment has offered substantial value to CEOC in an effort to end the protracted and expensive bankruptcy proceedings of CEOC,” said Fred Kleisner, chairman of the strategic alternatives committee. “Despite a proposal that would provide CEOC and its creditors with value that Caesars Entertainment believes would be more than sufficient to address the findings of the examiner, as well as settle the ongoing guarantee litigation pending against the company, there remains disagreement between the parties, over how to quantify and allocate this value.”

Caesars has said that, if CEOC does not emerge from bankruptcy soon or if one or more of their litigation cases go against them, it is likely that the company would be forced to file for bankruptcy itself.


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