Item 1.01 Entry into a Material Definitive Agreement.
CERP and CGPH Restructuring
On
December 22, 2017, Caesars Entertainment Corporation (the
Company
) announced the formation of Caesars Resort Collection, LLC (
CRC
) and completion of the refinancing of all existing debt at its wholly-owned
subsidiaries Caesars Growth Properties Holdings, LLC (
CGPH
) and Caesars Entertainment Resort Properties, LLC (
CERP
). Following the receipt of certain regulatory approvals, CERP merged into CGPH, with the merged
entity renamed to Caesars Resort Collection, LLC, and CRC Escrow Issuer, LLC (
CRC Escrow Issuer
) merged into CRC.
CRC Credit Agreement
Overview
Substantially concurrently with the CERP and CGPH restructuring described above, CRC entered into new $5,700 million senior secured credit
facilities (the
CRC Credit Facility
), including a $1,000 million five-year revolving credit facility (the
CRC Revolving Credit Facility
), and a $4,700 million seven-year first lien term loan (the
CRC Term Loan
). The CRC Credit Facility was funded and closed pursuant to the Credit Agreement, dated as of December 22, 2017 (the
CRC Credit Agreement
), by and among CRC, the other borrowers from time to
time party thereto (together with CRC, the
Borrowers
), the lenders party thereto, and Credit Suisse, AG, Cayman Islands Branch, as administrative agent (the
Administrative Agent
). The CRC Credit Agreement
permits the Companys wholly-owned subsidiary CEOC, LLC (
CEOC
), to join as an additional borrower thereunder or to be acquired by CRC, in each case, subject to certain conditions set forth in the CRC Credit Agreement (the
occurrence of any such event, a
CEOC Event
).
The CRC Term Loan matures in 2024; the CRC Revolving Credit Facility
matures in 2022 and includes a letter of credit
sub-facility.
The CRC Term Loan requires scheduled quarterly payments in amounts equal to 0.25% of the original aggregate principal amount of the CRC Term Loan,
with the balance due at maturity. As of December 22, 2017, $300 million was outstanding under the CRC Revolving Credit Facility and approximately $100,000 was committed to outstanding letters of credit.
The CRC Credit Agreement allows the Borrowers to request one or more incremental term loan facilities and/or increase their commitments under
the CRC Revolving Credit Facility in an aggregate amount of up to the sum of (x) the greater of (1) $1,000 million (increasing to $1,450 million after a CEOC Event) and (2) 1.00 times EBITDA (as defined in the CRC Credit Agreement)
plus (y) the amount of certain voluntary prepayments plus (z) such additional amount so long as, (i) in the case of loans under additional credit facilities that rank pari passu with the liens on the collateral securing the CRC Credit
Agreement, the Borrowers senior secured leverage ratio on a pro forma basis would not exceed 4.75 to 1.00, (ii) in the case of loans under additional credit facilities that rank junior to the liens on the collateral securing the CRC Credit
Agreement, the Borrowers total secured leverage ratio on a pro forma basis would not exceed 5.00 to 1.00 and (iii) in the case of loans under additional credit facilities that are unsecured, the Borrowers interest coverage ratio on
a pro forma basis would not be less than 2.00 to 1.00, in each case, subject to certain conditions and receipt of commitments by existing or additional financial institutions or institutional lenders.
All future borrowings under the CRC Credit Agreement are subject to the satisfaction of customary conditions, including the absence of a
default and the accuracy of representations and warranties, subject to certain exceptions.
Interest and Fees
Borrowings under the CRC Credit Agreement bear interest at a rate equal to, at the Borrowers option, either (a) the London Interbank
Offered Rate (
LIBOR
) determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs, subject to a floor of 0% or (b) a base rate
determined by reference to the highest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by the Administrative Agent and (iii) the
one-month
adjusted LIBOR rate plus 1.00%,
in each case plus an applicable margin. Such applicable margin shall be (a) with respect to the CRC Term Loan, 2.75% per annum in the case of any LIBOR loan or 1.75% per annum in the case of any base rate loan and (b) in the case of the
CRC Revolving Credit Facility, 2.25% per annum in the case of any LIBOR loan and 1.25% per annum in the case of any base rate loan, subject in the case of the CRC Revolving Credit Facility to two 0.125% step downs based on the Borrowers senior
secured leverage ratio.
In addition, on a quarterly basis, the Borrowers are required to pay each lender under the CRC Revolving Credit
Facility a commitment fee in respect of any commitments under the CRC Revolving Credit Facility in the amount of 0.50% of the principal amount of the commitments of such lender, subject to stepdowns to 0.375% and 0.25% based upon the Borrowers
senior secured leverage ratio. The Borrowers are also required to pay customary agency fees as well as letter of credit participation fees computed at a rate per annum equal to the applicable margin for LIBOR borrowings on the dollar equivalent of
the daily stated amount of outstanding letters of credit, plus such letter of credit issuers customary documentary and processing fees and charges and a fronting fee in an amount equal to 0.125% of the daily stated amount of such letter of
credit.
Mandatory and Voluntary Prepayments
The Credit Agreement requires the Borrowers to prepay outstanding term loans, subject to certain exceptions, with:
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50% (which percentage will be reduced to 25% if the senior secured leverage ratio is greater than 3.25 to 1.00 but less than or equal to 4.00 to 1.00, and to 0% if the Borrowers senior secured leverage ratio is
less than or equal to 3.25 to 1.00) of the Borrowers annual excess cash flow (as defined in the CRC Credit Agreement) to the extent such amount exceeds $10 million (increasing to $15 million after a CEOC Event);
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100% (which percentage will be reduced to 50% if the senior secured leverage ratio is greater than 3.25 to 1.00 but less than or equal to 4.00 to 1.00, and to 0% if the Borrowers senior secured leverage ratio is
less than or equal to 3.25 to 1.00) of the net cash proceeds of certain
non-ordinary
course asset sales or certain casualty events, in each case subject to certain exceptions and provided that the Borrowers
may (a) reinvest within 18 months or (b) contractually commit to reinvest those proceeds within 18 months, and so reinvest such proceeds following the end of such 18 month period, to be used in their business, or certain other permitted
investments; and
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100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the CRC Credit Agreement.
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Collateral and Guarantors
The borrowings
under the CRC Credit Agreement will be guaranteed by the material, domestic, wholly-owned subsidiaries of the Borrowers (subject to exceptions), and will be secured by a pledge (and, with respect to real property, mortgage) of substantially all of
the existing and future property and assets of the Borrowers and the guarantors (subject to exceptions), including a pledge of the capital stock of the domestic subsidiaries held by the Borrowers and the guarantors and 65% of the capital stock of
the first-tier foreign subsidiaries held by the Borrowers and the guarantors, in each case subject to exceptions.
Restrictive Covenants and Other
Matters
The CRC Revolving Credit Facility includes a maximum first-priority net senior secured leverage ratio financial covenant,
which is applicable solely to the extent that the testing condition (which is defined in the CRC Credit Agreement as 25% utilization of the CRC Revolving Credit Facility (excluding certain letters of credit)) is satisfied and excluding any period in
which a covenant suspension period (as defined in the CRC Credit Agreement) is occurring. In addition, for purposes of determining compliance with such financial maintenance covenant for any fiscal quarter, the Borrowers may exercise an equity cure
by issuing certain permitted securities for cash or otherwise receiving cash contributions to the capital of the Borrowers or any of their direct or indirect parents that will, upon the receipt by a Borrower of such cash, be included in the
calculation of EBITDA on a pro forma basis. The equity cure right may not be exercised in more than two fiscal quarters during any period of four consecutive fiscal quarters or more than five fiscal quarters during the term of the CRC Revolving
Credit Facility. Under the CRC Credit Agreement, the Borrowers may also be required to meet specified leverage ratios or interest coverage ratios in order to take certain actions, such as incurring certain debt or making certain acquisitions. In
addition, the CRC Credit Agreement includes negative covenants, subject to certain exceptions, restricting or limiting the Borrowers ability and the ability of their restricted subsidiaries to, among other things: (i) make
non-ordinary
course dispositions of assets; (ii) make certain mergers and acquisitions; (iii) complete dividends and stock repurchases and optional redemptions (and optional prepayments) of subordinated
debt; (iv) incur indebtedness; (v) make certain loans and investments; (vi) create liens; (vii) transact with affiliates; (viii) change the business of the Borrowers and their restricted subsidiaries; (ix) enter into
sale/leaseback transactions; (x) allow limitations on negative pledges and the ability of restricted subsidiaries to pay dividends or make distributions; (xi) change the fiscal year and (xii) modify subordinated debt documents.
This foregoing summary does not purport to be complete and is qualified in its entirety by reference to the CRC Credit Agreement, which is
attached hereto as Exhibit 10.1 and incorporated herein by reference.
CRC Supplemental Indenture
Substantially concurrently with the CERP and CGPH restructuring and the entry into the CRC Credit Agreement, CRC, CRC Finco, Inc. (
CRC
Finance
and, together with CRC Escrow Issuer, the
Initial CRC Issuers
)and other subsidiaries of CRC entered into a supplemental indenture (the
CRC Supplemental Indenture
) to that certain indenture,
dated as of October 16, 2017, by and among the Initial CRC Issuers and Deutsche Bank Trust Company Americas, as trustee (the
CRC Indenture
), and the gross proceeds of the offering by the Initial CRC Issuers of $1,700,000,000
aggregate principal amount of 5.250% senior notes due 2025 issued on October 16, 2017 (the
CRC Notes
) were released from escrow. Pursuant to the CRC Supplemental Indenture, CRC assumed the obligations of CRC Escrow Issuer
under the CRC Indenture and the CRC Notes, and each wholly-owned, domestic subsidiary of CRC that is a subsidiary guarantor to the CRC Credit Facility (other than CRC Finance) became a guarantor under the CRC Indenture.
The foregoing description of the CRC Supplemental Indenture is qualified in its entirety by reference to the CRC Supplemental Indenture, which
is attached hereto as Exhibit 4.1 and incorporated herein by reference.
CRC Refinancing Proceeds
Proceeds from the CRC Notes and the CRC Credit Facility, together with approximately $171 million of cash on hand, were used to
(i) repay in full (including accrued and unpaid interest) and terminate the existing senior secured credit facilities of CERP and CGPH, as disclosed under Item 1.02 below, and (ii) pay off, as disclosed under Item 8.01 below, (a) with
respect to CGPH and Caesars Growth Properties Finance, Inc. (collectively, the
CGPH Purchasers
or the
CGPH Issuers
), $675,000,000 aggregate principal amount of their 9.375% Second-Priority Notes due 2022 (the
CGPH Notes
) plus accrued and unpaid interest, and (b) with respect to CERP and Caesars Resort Properties Finance, Inc. (collectively, the
CERP Purchasers
), Harrahs Las Vegas, LLC, Harrahs
Laughlin, LLC, Rio Properties, LLC, AC Conference Holdco., LLC, AC Conference Newco., LLC, Caesars Linq, LLC, Caesars Octavius, LLC, Flamingo
Las Vegas Operating Company, LLC, Harrahs Atlantic City Mezz
1-9,
LLC (each of Harrahs Atlantic City Mezz
1-9,
LLC a separate entity), Harrahs Atlantic City Operating Company, LLC, Harrahs Atlantic City Propco, LLC, Octavius/Linq Intermediate Holding, LLC and Paris Las Vegas Operating Company, LLC
(collectively, together with the CERP Purchasers, the
CERP Issuers
), $1,000,000,000 aggregate principal amount of the 8% First-Priority Senior Secured Notes due 2020 (the
CERP 2020 Notes
) and $1,150,000,000
aggregate principal amount of the 11% Second-Priority Senior Secured Notes due 2021 (the
CERP 2021 Notes
and, together with the CERP 2020 Notes, the
CERP Notes
, and, the CERP Notes, together with the CGPH Notes,
the
Notes
) plus accrued and unpaid interest.
Item 1.02 Termination of a Material Definitive Agreement
Termination of first lien credit agreements of CERP and CGPH
On December 22, 2017, in connection with the foregoing transactions, certain subsidiaries of the Company repaid all amounts outstanding
under the existing senior secured credit facilities of CERP and CGPH (respectively, the
CERP Credit Facility
and
CGPH Credit Facility
and together, the
Existing Credit Facilities
) and
terminated the credit agreements relating to such Existing Credit Facilities. The existing credit agreements were (i) that certain first lien credit agreement governing the CERP Credit Facility, dated as of October 11, 2013, by and among
CERP, Caesars Entertainment Resort Properties Finance, Inc., Harrahs Las Vegas, LLC, Harrahs Atlantic City Holding, Inc., Rio Properties, LLC, Flamingo Las Vegas Holding, LLC, Harrahs Laughlin, LLC, Paris Las Vegas, LLC, the
lenders party thereto from time to time and Citicorp North America, Inc., as administrative agent and (ii) that certain first lien credit agreement governing the CGPH Credit Facility, dated as of May 8, 2014, by and among CGPH, Caesars
Growth Properties Parent, LLC, the lenders party thereto from time to time and Credit Suisse AG, Cayman Islands Branch, as administrative agent.
Immediately following the foregoing transactions, certain subsidiaries of the Company discharged certain indentures as disclosed under Item
8.01 below.
The information set forth under Item 1.01 above and Item 8.01 below is hereby incorporated by reference as applicable into
this Item 1.02.