The Ledger
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Apollo and TPG transferred Caesars casinos to bankruptcy-remote entities
“Apollo and TPG executed a series of these complex asset deals, asset transfers, financial engineering, where more money is put in the business. They buy casinos from the existing Caesars and Harris Opgo, all in an attempt, ostensibly, to Keep everybody's inves…”
OpCo stock buyers were debt holders benefiting from guarantee release
“And in fact, the hedge funds that bought the stock in Opco were all hedge funds who had debt positions, who were benefiting for the release of that guarantee.”
Caesars restructuring centered on fraudulent conveyance accusations over property transfers
“The mass tort in the case of Caesars is the accusation of fraudulent conveyance in these transactions where many of the top properties of the Caesars opco ended up in these affiliated entities where Apollo owned them, and they were out of the hands of Creditor…”
Caesars restructuring became a PE roadmap rather than a cautionary tale
“Caesars ended up being less of a cautionary tale and more of a roadmap, and the reason for that, I think, is very simple. People realized that after this deal, Apollo raises a twenty-five billion dollar fund, and the LP community didn't really penalize them, a…”
Pre-LBO Harrah's bonds were subordinated to the bottom of OpCo
“And there was also some pre LBO Harrah's debt, which the covenants and the documents didn't call for it to be repaid. So all those bonds were unsecured. They were investment grade bonds, so they were relatively low risk at the time. Since those didn't get refi…”
Caesars eliminated its parent guarantee by selling OpCo equity
“The guarantee can go away according to the indentures through three different conditions. One of those conditions is if the OPCO is no longer a wholly owned subsidiary. So if they sell five percent or some portion of the OPCO stock to third parties, the guaran…”
Elliott and Appaloosa are the two most important distressed debt players
“So if you think about what I think are the two most important players in the distressed debt world, those are, in my view, Elliott and Appaloosa”
Distressed debt investment returns are uneven and poor over time
“And if you look at distressed debt returns, they're uneven and they're not great over time.”
Blackstone's Hilton buyout generated $14 billion, arguably the greatest PE deal ever
“And within a few years, the business snaps back and Blackstone goes on to make fourteen billion dollars or something like that. And it's arguably from a gross dollar value, the greatest private equity investment ever.”
Apollo aligned with Elliott and GSO to pressure junior creditors
“They go into bankruptcy with this deal with Elliott. They very quickly get a deal with the GSO group, and that is supposed to create all kinds of pressure on the most junior debt holder, which is the Oak Tree Appaloosa second lead bondholders.”
Bankruptcy judges balance power dynamics away from sheer distressed fund size
“The wild card is when you actually are in bankruptcy, things change a little bit in terms of the power dynamic, because there is now a judge who's overseeing the entire case. And that judge not only cares about size, he cares about the equities of the case and…”
Excess liquidity is eliminating traditional distressed debt opportunities
“The reality is there isn't great traditional distressed debt investing opportunities at the moment because there's so much liquidity in the market and companies that probably deserve to go under are able to kick the can and avoid reckonings.”
Apollo and TPG funded 80% of Harrah's $30 billion buyout with debt
“They put together a deal to buy Cesar O'Hara's for almost thirty billion dollars, putting just six billion dollars down to it. So basically, 80% of the purchase price is funded with debt”
Caesars OpCo raised $18 billion in loans and high-yield bonds
“There is two basic components of the capital structure. So if there's twenty four billion dollars of debt, there's one vehicle which we'll call the Caesars or Harrah's Opco, where most of the casinos are, and that would raise eighteen billion dollars of tradit…”
Caesars buyout took 14 months between signing and closing
“As we talk about in the book, there's this fourteen-month gap between signing and closing from December of 2006, essentially the peak of the market to Early 2008 when the financial crisis is just on the doorstep.”
Long-only debt buyers sold Caesars paper at huge losses to distressed funds
“I mean, there's all these traditional long-only buyers of debt, whether it's loans or bonds, who bought Caesar's paper along the way, starting in 2007 and 2008, and they ultimately sold their paper for huge losses, and they sold it to the likes of Elliott and …”