March 3 (Reuters) - The operating unit of casino company Caesars Entertainment Corp unveiled its plan to cut $10 billion of debt and to exit Chapter 11 in a late Monday filing with a U.S. Bankruptcy Court.
The plan formalized a proposal negotiated with senior creditors prior to the casino operator’s January bankruptcy filing. It must be approved by U.S. Bankruptcy Judge Benjamin Goldgar in Chicago and creditors, a process that can easily take a year or more.
Under the proposed plan, the bankrupt unit would be split into an operating company that runs 38 casinos in 14 states and a property company that owns the real estate.
“The debtors believe this structure materially improves stakeholder recoveries versus a more traditional ‘standalone’ restructuring,” the company said in a court filing.
The plan was filed on Monday when the parent company Caesars Entertainment reported a $1 billion net loss for the last quarter of 2014, which narrowed from a net loss of $1.76 billion a year earlier. Shares of the parent company were up 1.2 percent at $11.15 in midday trade on Nasdaq.
The property company would be controlled by a real estate investment trust, which benefits from more favorable tax treatment, creating value for the creditors.
In exchange for the $6.3 billion they are owed, a group of creditors known as the first-lien noteholders would own the operating company when it exits bankruptcy. The noteholders would also own about 70 percent of the property company, with junior creditors getting the rest in exchange for their $5.2 billion in debt.
The plan formalizes a proposal that was agreed to by the first-lien noteholders prior to the bankruptcy filing by Caesars’ operating unit.
The bankruptcy put on hold lawsuits launched by other creditors who alleged the parent company looted the operating unit of its best casinos and properties and left it without enough assets to pay its debts.
The parent company is controlled by Apollo Global Management and TPG Capital, private equity firms that created Caesars after they led the $30.7 billion leveraged buyout of Harrah’s Entertainment in 2008. The parent company has said the property transfers were done for fair value and supports the appointment of an independent examiner to investigate creditors’ claims.
The request to appoint an examiner will be considered at a Wednesday hearing in Chicago.
The case is Caesars Entertainment Operating Co, U.S. Bankruptcy Court, Northern District of Illinois, No. 15-01145 (Reporting by Tom Hals in Wilmington, Delaware; Editing by James Dalgleish)