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Caesars Entertainment Corp. said on Monday that its main operating unit received a notice of default from UMB Bank last week at a time when the gambling firm is seeking creditor approval for a potential real estate investment trust plan. Caesars called the UMB claims “meritless”.
Reports surfaced last week that Caesars was unable to make certain debt payments and that it was contemplating bankruptcy as it will be unable to repay debts by the fourth quarter of 2015 without restructuring.
The company wrote in a regulatory statement that it spent $550 million and anticipates negative cash flow for the foreseeable future.
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Caesars wrote: “does not expect its cash flows from operations will be sufficient to repay its indebtedness and will ultimately need to pursue additional debt or equity offerings or seek a refinancing, amendment, private restructuring nor reorganization under Chapter 11 of the Bankruptcy Code.”
The company is looking to restructure $18.4 billion in debt stemming from its leveraged buyout by Apollo Global Management LLC and TPG in 2008.
Some analysts have supported Caesars placing its largest operating division into a real estate investment trust to deal commonly referred to as a REIT though it is widely understood that the company will be unable to avoid bankruptcy in 2015.
“Such a maneuver, if executed, can increase CEOC’s value by an estimated 13 percent,” Fitch gaming analyst Michael Paladino said in a report late last week to investors. “With the company’s cash, CEOC could be worth roughly $11 billion, compared with $9.7 billion without the spinoff.”
Caesars has been exposed to the crumbling casino market in Atlantic City while China’s Macau has also begun to experience a major decline in recent weeks.
- Aaron Goldstein, Gambling911.com
