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Caesars Entertainment to position CEOC for stock listing

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Staff writer |
Caesars EntertainmentCaesars Entertainment Corporation announced a series of steps designed to position its subsidiary, Caesars Entertainment Operating Co. (CEOC), for a stock listing and significant deleveraging.

The actions include: a new $1.75 billion first lien debt offering by CEOC, the proceeds of which will be used to redeem all of CEOC's existing 2015 maturities and repay existing bank debt; the sale by Caesars Entertainment of 5% of CEOC's equity to institutional investors, in connection with which Caesars Entertainment has agreed that CEOC will pursue a listing of such shares in the future; the closing of the previously announced sale of three CEOC-owned Las Vegas properties to Caesars Growth Partners; the launch of an amendment of CEOC's credit facility; and expansion of CEOC's board of directors, with the intention of adding two new independent directors following regulatory approval.

As part of its comprehensive financing plan, CEOC today launched a transaction to raise $1.75 billion of first lien debt. The debt will be raised as a new term loan B-7 tranche under CEOC's credit facility. As of the date of this announcement, CEOC has already received orders for approximately $1.7 billion of the new B-7 tranche from several institutions and will seek additional commitments this week.

As a condition to the proposed financing, new B-7 lenders have required that the Caesars Entertainment guarantee of CEOC debt be limited to bank debt holders that consent to the amendment launched today, plus no more than approximately $2.9 billion of additional indebtedness.

Assuming a $1.75 billion offering, CEOC intends to use the proceeds from the new first lien term loan and cash on its balance sheet to repay all of CEOC's 2015 maturities, which consist of approximately $29 million of term loans due 2015, $215 million of second lien notes due 2015 and $792 million of unsecured notes due 2015 and to repay $800 million of term loans under CEOC's existing credit facility.

Caesars Growth Partners has committed to use all of the proceeds from the repayment of the $427 million of unsecured notes due 2015 that it owns to purchase a portion of the new term loan B-7 tranche. Pro forma for the proposed refinancing, CEOC will have no significant debt maturities until 2016.

Further, CEOC anticipates having discussions with representatives of certain holders of its first lien notes to raise the possibility of increasing the size of the new B-7 term loan and using a portion of the incremental proceeds to retire existing first lien notes and additional indebtedness under the CEOC credit facility.

CEOC is also launching a credit facility amendment to provide covenant relief and additional runway for CEOC. Upon receipt of amendment consents from lenders representing at least a majority of CEOC's outstanding credit facility, CEOC's maintenance covenant level will be modified, among other changes.

In addition, CEOC's credit agreement and other loan documents will be modified to provide that, after the effectiveness of the amendment, Caesars Entertainment shall provide a guarantee of collection and not of payment. As requested by CEOC's lenders under the new B-7 tranche, the Caesars Entertainment guarantee will be limited to consenting bank debt holders, plus no more than approximately $2.9 billion of additional indebtedness. Holders of approximately $2.1 billion of the credit facility have already approved the amendment.

Lenders that consent to the amendment will receive a principal paydown and a one-time fee pursuant to the terms of the amendment. The amendment period will be closed upon the receipt of consents for a majority of the credit facility and satisfaction of other customary closing conditions.

CEOC also announced the closing of the previously announced sale of Bally's Las Vegas, The Cromwell (formerly Bill's Gamblin' Hall & Saloon) and The Quad Resort & Casino to Caesars Growth Partners, following the receipt of approval from the Nevada Gaming Commission. The sale of Harrah's New Orleans is expected to close following approval by the Louisiana Gaming Control Board. The sale is expected to close in the second quarter.

Caesars Entertainment also completed the sale of 5% of the equity in CEOC to institutional investors in a private transaction. The sale of equity could, once listed, result in a liquid and tradable equity currency that may facilitate future capital markets transactions. CEOC may use its equity for liability management and debt reduction initiatives.

The sale of equity in CEOC resulted in the release of the Caesars Entertainment guarantee of CEOC's bonds in accordance with the terms of the bond indentures. Caesars Entertainment may seek to expand the group of investors with a goal of increasing the number of holders of CEOC equity in order to help qualify the CEOC equity for listing on a national securities exchange.

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