The Wall Street Skinny 40. Distressed Debt and Restructuring 101: Caesars Palace Coup (Part II)
Dec 23, 2023
In this podcast, Sujeet Indap and Max Frumes, authors of the book Caesars Palace Coup, discuss the distress-for-control maneuvers and questionable asset transfers that Apollo spearheaded after the $30bn Leveraged Buyout of Caesars in 2008. They explore the showdown between Private Equity titans and creditors, highlighting the manipulation of legal and capital structures. Other topics include holiday plans, dealing with water damage, LBO structure, capital structure and risk in investments, Apollo's influence, Opco's financial struggles, and strategies in taking on Apollo in a distressed debt and restructuring situation.
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Complex Capital Structure Explained
- Caesars' capital structure had a parent, operating company (OpCo), and property company (PropCo) each with different debt layers.
- Debt was secured at different entities, affecting creditor claims and recovery rights in bankruptcy.
Post-LBO Recession Impact
- After the 2008 LBO, the recession devastated Caesars' cash flows, pressuring debt payments.
- Apollo and TPG split responsibilities: Apollo managed liabilities and equity, TPG managed assets, resulting in severe cost cutting hurting brand value.
Distress-for-Control Maneuvers
- Distressed exchange offers allowed Caesars to reduce debt face value while pushing maturities out.
- This "distress-for-control" enhanced private equity investors' positions but increased risk for debt holders.