If you’ve graced the halls of one of the world’s wide selection of luxurious casinos in the past, you’ve probably heard the old expression about the house and its tendency to come out on top.
After all, if casino owners are able to build those giant, glamorous monuments to the art of wagering in locations around the planet, there must be something profitable about owning and operating a major gambling hall, right? Well, casino giant Caesars Entertainment Corp., the largest casino company operating in the United States, is proving that even the house can have a run of bad luck from time to time.
On Thursday, the casino company which owns or operates a portfolio of 38 casino and resort properties in 14 U.S. states and five countries, filed paperwork to place its operating unit under Chapter 11 bankruptcy protection in order to proceed with a plan to cut down on its $18.4 billion debt in the near future. While the majority of senior bondholders are on board with bankruptcy plans, the corporation’s junior noteholders are crying foul. The plan, which would cut debts by splitting Caesars into a separate casino company and a publicly traded real estate trust, is allegedly the result of corporate looting and abuse, according to a statement from the junior noteholders, who are led by the Appaloosa Management hedge fund.
The objections from junior noteholders led a Delaware judge to intervene and halt the case before it was able to get started. Analysts say that the legal standoff marks the opening of a new phase in what have already been complex debt negotiations for the company. Allegations of impermissible payments to encourage the support of senior noteholders regarding the proceedings are just one of many complicating factors that are putting bankruptcy proceedings on hold for the time being.
A major portion of Caesars’ substantial debt is a lasting effect of the company’s $30 billion leveraged buyout of Harrah’s Entertainment in 2008, which was led by private equity firms Apollo Global Management and TPG Capital. A downtown of the U.S. economy, combined with an increasing number of gambling options throughout the county, led the deal into trouble almost immediately following completion. A failed venture into Macau, the largest gambling hub in the world, also had an effect on the profitability of the casino giant.
Caesars Entertainment Corp. was founded in 1937 as Harrah’s Entertainment and operated a small bingo parlor in Reno, Nevada. In 1971, the company went public before becoming the first casino company listed on the New York Stock Exchange (NYSE) in 1973. In 2005, the company now known as Caesars completed a merger with Caesars Entertainment, Inc., giving the company over 40 total casinos and nearly 100,000 employees. In January 2008, the company delisted from the NYSE and was taken private by Hamlet Holdings. In November 2010, Harrah’s Entertainment, Inc. became Caesars Entertainment Corp.
The company currently owns and operates casinos in some of the most popular gambling destinations in the United States and abroad. The company’s four major brands, Bally’s, Caesars, Harrah’s and Horseshoe account for over 25 casinos throughout the United States.