Caesars Entertainment’s owners may end up b but they will still have made hundreds of millions on the deal. Top managers at Leon Black’s Apollo Global Management, along with TPG Capital, have collected nearly $370 million in transaction and management fees from the slumping casino giant over the past eight years. At the same time, the firms’ principals have wagered little of their own money, chipping in around $60 million when they took Caesars private in a $30 billion leveraged buyout in 2008, according to a Post analysis of investment documents.
While the top managers reaped millions regardless of how the company performed, investors in their buyout funds are losing money on their Caesars investment. The PE firms are also asking creditors to accept less than they’re owed under a plan to restructure Caesars’ biggest operating unit. This isn’t sitting well with some bondholders — or the judge — in a contentious $18 billion bankruptcy that could push the parent company into Chapter 11 as well.
The plan calls for the parent to contribute $4 billion to the restructuring, with no additional money coming from the buyout shops. It would also shield the partners at the PE firms who served as directors from any legal liability. At a hearing last week, Judge Benjamin Goldgar in Chicago federal court criticized Apollo and TPG for not helping fund the restructuring plan.
Goldgar questioned why creditors were being asked to take a haircut while the firms and its directors skate. “The plan the debtors want to confirm would release those claims [against the firms and the company’s directors] yet as far as I know, none of those companies and individuals, all of whom would benefit from the proposed release, has contributed so much as a dime under the plan,” Goldgar said. Bondholders have filed suits in New York and Delaware, accusing Caesars and its PE owners of engaging in fraud and stripping away the best assets before putting the unit into bankruptcy.
The Delaware suit also threatens top managers at the buyout shops, including TPG’s David Bonderman and Apollo’s Marc Rowan, alleging they violated their financial duties as directors on the board of the bankrupt unit. A bankruptcy examiner found that Caesars and its PE backers could be on the hook for as much as $5 billion. Caesars is due back in court Tuesday when it will try to persuade the judge to extend a freeze on the suits seeking to grab billions from the parent while it tries to reach a deal with creditors.
Goldgar is expected to decide this week whether to extend the stay that expires Aug. 29. The judge didn’t hold out much hope last week.
Goldgar pointed out that courts typically grant relief from creditor suits when the petitioners are personally at risk, and he did not see any evidence of that in the Caesars bankruptcy. “The judge said, ‘I don’t know why TPG and Apollo should ask for releases when they are not being drained of capital,” said one person present at the hearing. Apollo and TPG declined to comment.