The main takeaway from this book for business and financing practitioners is the capacity for producing value through business restructuring. Corporate restructuring is a considerable occasion affecting not just loan providers, staff members, and shareholders but also the relationships in between companies and their corporate consumers, providers, and competitors. It is the procedure by which business renegotiate the financial contracts they have participated in with their lenders and other stakeholders, generally in action to a monetary difficulty. Business restructuring successfully represents a “re-slicing of the business pie” or repairing of a “ill” capital structure.
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The company ultimately emerged from bankruptcy in October 2017. As part of the reorganization plan, Caesars Entertainment merged with another subsidiary, Caesars Acquisition Co., with a view to regrouping its gambling establishments and hotels under one roofing system. Apollo and TPG ultimately maintained a 16% cumulative stake in the new Caesars, which was controlled by creditors, however did not own any equity in the REIT that housed the residential or commercial property assets.
Ultimately, this book offers an outstanding account of what modern-day high financing and the distressed debt markets are in fact like, portraying the bitter financial and courtroom warfare in addition to the stress and shouting. It states a fascinating story of the clash of distressed debt hedge funds fighting private equity giants for their share of an iconic Las Vegas gambling establishment conglomerate.
A leveraged buyout of Caesars by Apollo Global Management and TPG Capital finished just prior to the 2008– 2009 worldwide financial crisis led to the casino-entertainment service provider going into Chapter 11 bankruptcy security in early 2015. This bankruptcy pitted deep-pocketed and aggressive distressed debt hedge funds (lenders) against personal equity owners Apollo and TPG. These lenders included first-lien bank loan holder GSO Capital Partners, first-lien shareholder Elliott Management Corporation, and second-lien bondholders Appaloosa Management and Oaktree Capital Management.
The book explains how in the final hours, the senior Caesar lenders were basically pleading Oaktree and Appaloosa (the second-lien bondholders) to withdraw their aggressive efforts, which were endangering a delicate compromise with Apollo.
Max Frumes and Sujeet Indap convey this basic legal principle in The Caesars Palace Coup: How a Billionaire Brawl Over the Famous Casino Exposed the Power and Greed of Wall Street, a real-life story of the January 2015 $18 billion Chapter 11 (reorganization) insolvency filing under the United States Bankruptcy Code of Caesars Entertainment Corp.s primary operating system, Caesars Entertainment Operating Company, Inc. (CEOC).
In the Caesars Chapter 11 insolvency, the distressed debt financiers were not just economically astute. They also weaponized the law, utilizing their knowledge of dense legalese in loan contracts and bond indentures to acquire the advantage in boardroom negotiations and in courtroom face-offs.
The book supplies an interesting inside account of the distressed debt markets, including the methods, the vibrant personalities, and the complex relationships. In lieu of purchasing underestimated stock, these risk-taking hedge funds pay 50 to 70 cents on the dollar in order to get controlling stakes in troubled companies.
Lots of readers of the book will be highly crucial of the blistered earth strategies of Apollo, its allies, and its lawyers and lobbyists. By 2015, in the view of Frumes and Indap, such private equity firms as Apollo had actually ended up being highly violent of creditors, wielding legal documents and hardball negotiating tactics to “take” worth from loan and bondholders that did not rightly belong to them. The lenders all looked for to maximize their healings, with senior creditors set to get over 100% and junior lenders assigned closer to 65 cents on the dollar.
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Insolvency law defeats contract law in the United States. When you acquire a home loan, concern bonds, sign a lease, or participate in an employment agreement, the deal is fully under the auspices of the United States and all of its laws, consisting of requirements of the debtors right to submit for bankruptcy protection.
The Caesars Palace Coup: How a Billionaire Brawl Over the Famous Casino Exposed the Power and Greed of Wall Street. Diversion Books.
Specialist Learning for CFA Institute Members
Mark K. Bhasin, CFA
Mark K. Bhasin, CFA, is senior vice president of Basis Investment Group, LLC, and accessory associate teacher of finance at the NYU Stern School of Business, New York City.
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The Caesars Palace Coup: How a Billionaire Brawl Over the Famous Casino Exposed the Power and Greed of Wall Street. A leveraged buyout of Caesars by Apollo Global Management and TPG Capital completed just prior to the 2008– 2009 global monetary crisis resulted in the casino-entertainment provider entering Chapter 11 insolvency protection in early 2015. As part of the reorganization strategy, Caesars Entertainment merged with another subsidiary, Caesars Acquisition Co., with a view to regrouping its gambling establishments and hotels under one roofing system. Apollo and TPG eventually retained a 16% cumulative stake in the new Caesars, which was controlled by financial institutions, however did not own any equity in the REIT that housed the property possessions.
The financial institutions all looked for to optimize their healings, with senior financial institutions set to get over 100% and junior creditors assigned closer to 65 cents on the dollar.