Caesars gets default notice from trustee for 10% second-priority notes

By Angela McDaniels

Tacoma, Wash., Oct. 7 – Caesars Entertainment Operating Co., Inc., a subsidiary of Caesars Entertainment Corp., received a notice of default on Oct. 3 from the trustee for its $3.7 billion of 10% second-priority senior secured notes due 2018, according to an 8-K filing with the Securities and Exchange Commission.

Caesars granted a security interest in and lien on some commercial tort claims to the lenders under its senior secured credit facilities and the holders of its first-priority senior secured notes.

The trustee for the 10% notes, Wilmington Savings Fund Society, FSB, said that to the extent the claims constitute assets or property of Caesars, it must grant a perfected security interest or perfected lien in favor of the 10% noteholders with 60 days of the notice in order to avoid an event of default.

Caesars said it is reviewing the notice and plans to take required action, if any, within the 60-day period to the extent required to avoid an event of default.

Caesars noted that an event of default under the 10% note indenture would constitute an event of default under its senior secured credit facilities and that under some circumstances, the holders of at least 30% of the outstanding 10% may accelerate the notes upon an event of default, which would trigger events of default under Caesars’ other secured and unsecured notes. The company said these consequences could have a material adverse effect on its business, financial condition, results of operations and prospects.

Caesars is a Las Vegas-based casino-entertainment company.

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