The Oral Argument held before the External Review panel for the Caesars Entertainment Operating Company, Inc. Failure to Pay question was held on February 5, 2015 in New York City. A video recording of the Argument is now available on the ISDA Credit Derivatives Determinations Committees website.
Please scroll down below the Event Publicly Available Information box for documents relating to the Caesars External Review.Reviewable Question and Statement of Fact: Caesars External Review Reviewable Question and Statement of Fact Current Americas External Review Panel List: Americas External Review Panel List The Oral Argument for the Caesars External Review is scheduled to take place on Thursday February 5.
Event Publicly Available Information:
Summary:
The question presented is whether a Failure to Pay credit event has occurred with respect to Caesars Entertainment Operating Company (“CEOC”) as a result of CEOC’s failure to pay in full the obligations due on December 15, 2014 with respect to its 10% Second-Priority Senior Secured Notes due 2015 and 10% Second-Priority Senior Notes due 2018 (collectively, the “Notes”), under Sections 4.01, 6.01 and/or 6.10 of the Indenture , or otherwise.
As set forth below, on December 12, 2014, CEOC forwarded to the Trustee and Paying Agent for the Notes a total of $18.5 million for payments due as of December 15, 2014. This amount was insufficient to pay both the principal and interest then due. Section 4.01 of the Indenture states that an installment of principal or interest is considered paid only if the Trustee or Paying Agent holds funds sufficient to pay all principal and interest then due. Section 6.01(b) of the Indenture states that an Event of Default occurs if there is a default in the payment of principal or premium of any Note when due upon required repurchase, and this default is not subject to any grace or cure period.
The insufficient funds advanced by CEOC were, in fact, ratably allocated between principal and interest due on the Notes by the Trustee in accordance with Section 6.10 of the Indenture, the applicability of which CEOC had been made aware of prior to advancing such funds.
On December 15, 2014 CEOC was required to make both (i) a mandatory principal redemption payment (the “December 15 Principal Obligation”) in the aggregate principal amount of $17,631,000 and (ii) a coupon payment (the “December 15 Coupon Obligation” and together with the December 15 Principal Obligation, the “December 15 Obligations”) in the aggregate amount of $41,271,000 on the Notes. On December 12, 2014 CEOC advanced $18,513,390 (the “December 15 Disbursement”) in connection with the December 15 Obligations—an amount insufficient to pay both the December 15 Principal Obligation and the December 15 Coupon Obligation. The December 15 Disbursement was ratably allocated between principal and interest then due and owing on the Notes. As a result, over $12 million of the December 15 Principal Obligation was not paid.
Relevant Events:
10/15/2014 - A Notice of Default was received by CEOC from holders of at least 30% of the Notes.
12/10/2014 – Debtwire reports on Section 6.10 of the Indenture, including the ratable application of payments between principal and interest.
12/12/2014 - $18.5 million cash was received by Trustee and Paying Agent from CEOC for payments due on December 15, 2014, and was allocated by the Trustee $5.5 million to principal and $13 million to interest.
12/18/2014 - $12.5 million principal was 3 days past due and unpaid as a result of the insufficient funds deposited by CEOC.
