Caesars offers $4 billion to help casino unit exit bankruptcy

By Tracy Rucinski

CHICAGO (Reuters) - Caesars Entertainment Corp (CZR.O) has offered $4 billion (£3 billion) in a new plan to help its casino operating unit emerge from Chapter 11, a lawyer for the unit told a U.S. Bankruptcy judge on Wednesday.

Under the new plan, creditors will receive a bigger payout than under an initial framework restructuring agreement, which included a contribution from the Caesars Entertainment parent worth $1.5 billion.

The initial agreement was widely opposed by creditors of the bankrupt unit, who are owed a collective $18.4 billion. They alleged that the parent, Caesars Entertainment, stripped away many of the best casinos and resorts and put them beyond the reach of the operating unit's creditors, something the parent has denied.

"In terms of recoveries to creditors, they are substantially improved down the line" under the new plan, lawyer David Seligman said in Chicago bankruptcy court on behalf of the Caesars unit on Wednesday.

Under Wednesday's proposal, once Caesars Entertainment completes its previously announced merger with its affiliate, Caesars Acquisition Co (CACQ.O), the combined company will issue $1 billion of convertible notes to the operating unit's creditors.

Creditors will also receive up to 47.5 percent of the common stock in the post-merger Caesars Entertainment and cash, valuing the entire contribution from the parent at $4 billion.

However, junior creditors led by hedge fund Appaloosa Management and investment management firm Oaktree Capital were unimpressed with the new offer in court on Wednesday, a sign that a bitter creditor fight may still ensue.

"We have a different view," Sidney Levinson said in court on behalf of the second-lien noteholders.

Junior creditors want to pursue claims against the parent and its private equity sponsors Apollo Global Management (APO.N) and TPG Capital [TPG.UL] they say could be worth as much as $12 billion, Levinson said.

An independent examiner said in March that Caesars Entertainment and its private equity backers could face up to $5.1 billion in legal claims.

Creditors must vote on the proposed plan and the U.S. Bankruptcy Court in Chicago has to confirm that the plan is fair before it can become effective, a process that can take many months.

Shares of Caesars closed down 5.8 percent at $6.87 in Nasdaq trading.

(Reporting by Tracy Rucinski in Chicago; Writing by Tom Hals in Wilmington, Delaware; Editing by Tom Brown and Jonathan Oatis)