Caesars Under Fire For Their “Creative” Asset Reshuffling Strategy
Last month we reported on the fourth quarter results for Caesars Entertainment Corp which made for some interesting reading. Caesars are in a major restructuring phase which is aimed at reducing their industry-high debt load of around $23 billion. It is not uncommon for companies in heavy debt to engage in “creative accounting” in order to reduce debt and return to the black. However Caesars’s move to create a another subsidiary called Caesars Growth Partners (CGP) in 2013 has now got the lawyers involved as creditors are questioning the asset shell game being employed by Caesars.
An article in CalvinAyre reports that “unidentified note holders” had hired lawyers in an effort to undo the controversial move of splitting up Caesars into different companies. Creditors and are concerned that that al the profitable assets of Caesars are being transferred into CGP while the heavily indebted assets remain under the umbrella of the parent company Caesars Entertainment Operating Co. (CEOC)
In the quarter four results released last month, one of the few beacons of light was Caesars Interactive Entertainment division which increased revenues by 52%. They are responsible for the World Series of Poker, social gaming and online gaming. Their 52% increase in revenues to reach $316.6m was without a doubt one of the only pluses in the Q4 results. The transfer of CIE to the CGP along with the Planet Hollywood Casino has got bondholders claiming that Caesars had breached its “fiduciary duties” to creditors.
Many believe that the move by Caesars to strip down their parent company of all the profitable assets and consolidating them in another entity is a well-planned stagey for an inevitable bankruptcy filing. In this scenario note-holders will not have much to divide up as the parent company is essentially left with not much more then debt ridden assets.
Of course Caesars denies these claims but it is now seemingly going to be up to the courts to decide if the financial chess game played by Caesars is going to be reversed. As it stands CEOC has the burden of up to 75 percent of Caesars’ debt with only a handful of underperforming casinos as assets.