Description

Caesars Acquisition Company (NASDAQ: CACQ)

·      Caesars Acquisition Company (NASDAQ: CACQ) is a significantly mispriced special situation, with at least two near term catalysts.  The mispricing is caused by the complexity of the situation and the risk of an adverse outcome in pending litigation and the ongoing bankruptcy process of CEOC (see below for more detail).

·      CACQ is a holding company formed to make an equity investment in Caesars Growth Partners LLC (CGP), along with contributions by Caesars Entertainment Corp (CEC or CZR).  

·      CACQ owns 38.8% of CGP (its ownership stake was reduced in April 2016 from 42.6% following an earn out adjustment, because earnings from a specified portion of the social and mobile games business of Caesars Interactive Entertainment, Inc. (CIE) exceeded a predetermined threshold amount in 2015), and CEC owns 61.2% of CGP.  CACQ is the managing member and sole holder of all of CGP’s outstanding voting units.  CGP owns 76% of CIE. 

·      The figures above for Net Debt and TEV are for Caesars Growth Partners LLC.  The TEV/EBIT above is for 2017 and 2018 based on the merged entity, and additional information can be found below.  As discussed in the financial projections linked below, CEC does not project GAAP Net Income for the merged entity, so projected GAAP EPS for the merged entity is not available.

·      Assuming 1) the announced $4.4 billion cash sale of CIE to Giant Interactive Group closes, and 2) the restructuring closes on the terms in the approved Disclosure Statement, the share price of CACQ that would reflect trading in line with the median of companies comparable to New CEC (Wynn Resorts, MGM Resorts, Las Vegas Sands, Pinnacle Entertainment, Boyd Gaming, Isle of Capri Casinos, and Penn National Gaming) is >$33 per share, or roughly 3x the current stock price, giving no credit for growth in EBITDA in 2018 and beyond.

·      Although CACQ should be shielded in the case of a potential bankruptcy of CEC (if CEC is ultimately forced into bankruptcy by judgments against it), there is a potential worst case outcome described below in the risks section in which the transactions that established CGP and CAC are rescinded, and CGP would only be entitled to an unsecured claim for the amount of the consideration it paid.  However, since rescission of the transfers that established CGP and CAC are most likely not practicable, the most likely risk is that CGP could be held liable for damages in an amount sufficient to compensate Plaintiffs for the loss of value relative to the price paid for the transferred assets, rather than being at risk of having the transactions rescinded. 

·      With the CGP leverage and concentrated private equity ownership of CACQ, CACQ is akin to a stub stock (the equity in a public LBO), and is likely to be exchanged for another stub stock (New CEC) as part of the merger of CACQ and CEC/CEOC.  The situation is also akin to an early Warren Buffett-style “workout.” 

·      The two potential catalysts are 1) the closing of the sale of the online gaming business of CIE, to be followed by a dividend to CACQ (potentially $6.32 per share), which is not fully appreciated by investors, and 2) Reaching consensual agreements with creditors for a restructuring, to be followed by the closing of a restructuring and the merger of CACQ and CZR/CEOC.

·      On July 30, 2016, CIE announced that a consortium including an affiliate of Shanghai Giant Network Technology will acquire CIE’s social and mobile games business (the "SMG Business") for cash consideration of $4.4 billion (subject to customary purchase price adjustments).  The assets to be sold are limited to the SMG Business and will not include CIE's interest in the WSOP brand and other WSOP-related intellectual property or CIE's online real money gaming business. 

·     A key point: If this CIE transaction is completed prior to the restructuring being completed (a confirmation hearing to vote on the restructuring is set for January 17, 2017), CGP has the ability to make a distribution to CACQ (by dividend or otherwise) up to CACQ’s pro rata share of the net cash proceeds from the transaction (net of taxes, expenses, etc.).  CACQ’s pro rata share of the net cash proceeds from a $4.4 billion sale would be worth $6.32 per CACQ share (55% of the current stock price of $11.48).

·     This ability to pay this dividend to CACQ shareholders was *not* in the original Restructuring Support Agreement (RSA), dated 6/12/16, but was added to the amended RSA signed on 7/9/16, and this ability does not seem to be appreciated by investors.  Neither the press release describing the amended RSA nor the summary in the 8K describing the amended RSA mentions the ability to pay this dividend, and I have not seen any mention of it by analysts, reporters, etc.  The description of the ability to pay a dividend to CACQ can only be found in the text of the amended RSA (on the top of pg. 18 in section 16 “CIE Transaction; CAC Liquidity Transactions”).

·      Hamlet Holdings LLC, an entity controlled by Apollo Global Management and TPG Capital, owns 65.58% of CACQ and 60.14% of CZR (so on the margin, if there is a choice between economics accruing to CACQ or to CZR, Apollo and TPG benefit more from those economics accruing to CACQ).  They own a larger percentage of CACQ than of CZR because Apollo and TPG oversubscribed in the rights offering that was used to effect a spinoff in the formation of CACQ (see below for more detail on their participation in the rights offering).  Apollo and TPG along with their legal teams are working hard to reach consensual agreements with creditors for a restructuring and to maximize the value of CACQ shares.

·      In addition, several accomplished investors who own equity in CACQ (Paulson & Co., Soros Fund Management, and Canyon Capital) also own second-lien debt, are amenable to a restructuring agreement, and have been buyers of CACQ in recent quarters.  Paulson & Co. owns 9.6% of CACQ, Soros Fund owns 4.8%, and Canyon Capital owns 1.4%.  Hamlet Holdings together with these investors control 81.3% of CACQ.

The change in ownership of CACQ equity during the last 4 quarters by the second-lien holders friendly to Apollo and TPG (Paulson, Soros, and Canyon) has been the following:

Since CACQ’s formation in 2013, there have been many significant developments at CEOC, Caesars Entertainment, and CGP—too many to detail in this writeup.  CACQ was written up once on VIC by xanadu972 on Nov. 29, 2013 shortly after it was formed, and that writeup has some background on the formation. 

For complete current background on the situation, you should read the following documents:

·      Disclosure Statement that was approved and filed 6/28/16:

https://cases.primeclerk.com/CEOC/Home-DocketInfo?DocAttribute=1284&DocAttrName=PLANDISCLOSURESTATEMENT

Note that Exhibit J (starting on page 1,078) contains the “New CEC Financial Projections.”

·      Examiner Report filed 3/16/16: http://online.wsj.com/public/resources/documents/CaesarsReport03-16-2016.pdf.

The full Examiner report with Appendices can be found at:  https://cases.primeclerk.com/CEOC/Home-DocketInfo filed on 5/16/2016 under Docket #3720 and #3721.

The key developments relative to the current CACQ investment opportunity have been the following:

1) CEC’s largest unit (CEOC) filed for Chapter 11 bankruptcy protection on January 15, 2015, and has been negotiating with CEOC’s creditor groups to try to gain their support for a restructuring agreement.  Creditors have brought multiple lawsuits against CEC, which have been temporarily halted while CEC and the creditors pursue talks in mediation.  Junior creditors (holding second-lien debt) led by Appaloosa Management remain the biggest hold-outs in the CEOC bankruptcy, and have said they have as much as $12 billion in claims against CEC, Apollo and TPG.  CEC and CEOC are working with key creditor groups to try to achieve consensual agreements, and they are currently engaged in voluntary mediation over the terms of a plan.  CEC has said that if cases pending in federal and state courts in NY and DE are allowed to proceed, the potential damages could force CEC to also file for Chapter 11. The basic dispute is over each party’s assessment of the legal merits and valuation of the litigation claims. 

In June, Caesars won a reprieve which expires August 29, 2016 against suits in New York and Delaware while it tries to reach a restructuring deal with the creditors.  At the time, Judge Goldgar said the odds of extending the stay “will be slim.”  Goldgar also made it clear that Caesars should try to negotiate a deal with the holdouts rather than pressure them into a cram down settlement.  Caesars has until Monday August 15 to file court papers explaining why the cases should continue to be put on hold so it can finish negotiating deals with junior creditors in its bankrupt operating unit.  Judge Goldgar has set a hearing on the stay for August 23.

On July 31, 2016, CEC, CEOC, and holders of approximately 37% of the second lien notes entered into a restructuring support agreement (RSA).  The RSA will become effective upon the signing of the RSA by creditors holding at least 50.1% of the aggregate outstanding amount of the second lien notes.  However, a group of dissident bondholders including Appaloosa (who as a group hold 54% percent of the second lien notes) has since told Caesars’ bankruptcy mediator that it rejects CEC’s latest offer.  They have also agreed they will not sell their debt to anyone who does not agree to be a holdout as well, according to sources. 

2) CEC engaged the Raine Group in May 2016 to explore the sale of the CIE unit of CGP following “unsolicited bids that have exceeded $4 billion.”  CIE is one of the largest online, mobile and social gaming companies and is focused on casino entertainment. 

3) On 6/22/16 the bankruptcy judge approved the outline and disclosure statement for CEOC’s Chapter 11 Plan of Reorganization and set a confirmation hearing for January 17, 2017.  CEOC is seeking votes from creditors on its plan, which would cut $8.5 billion of debt (from $18.415b to $9.89b), and split the CEOC unit into a new operating company and a real estate investment trust.  Caesars Entertainment would contribute billions of dollars of cash and equity to CEOC to help repay CEOC's creditors.  Some of that cash would be generated by merging CEC with CACQ. 

4) On 7/9/16, CACQ and CZR entered into an Amended and Restated Agreement and Plan of Merger, which amended and restated their Agreement and Plan of Merger, dated 12/21/14.  Under the new agreement, holders of CACQ Common Stock immediately prior to the closing of the merger will receive twenty-seven percent (27%) of the outstanding CEC Common Stock on a fully diluted basis (prior to conversion of the New CEC Convertible Notes).

5) In connection with the entry into the Amended Merger Agreement, on 7/9/16, CAC and CEOC agreed to amend and restate the Restructuring Support Agreement (RSA), dated June 12, 2016, among CAC, CEOC and CEC, and each entered into a voting support agreement with respect to the proposed merger with affiliates of Apollo and TPG. 

A key point:  The Amended RSA allows CAC to effect the sale or other transfer of all or any material portion of the CIE business or assets, *and* provides that if any such CIE sale is consummated prior to the effective date of the Plan (a confirmation hearing to vote on the restructuring is set for January 17, 2017), CGP can make a distribution to CACQ (by dividend or otherwise) up to CACQ’s pro rata share (i.e., 38.8%) of the net cash proceeds of such CIE Transaction (net of taxes, transaction expenses and any working capital adjustment, holdback, indemnity payment or escrow for the benefit of the purchaser).  This ability to make a distribution to CACQ was *not* in the original RSA, but was added to the amended RSA signed on 7/9/16.

Interestingly, neither the press release describing the amended RSA nor the summary in the 8K describing the amended RSA mentions this ability to pay this dividend, and I have not seen any mention of it by reporters, analysts, etc.  The description of the ability to pay a dividend to CACQ can only be found in the text of the amended RSA (on the top of pg. 18 in section 16 “CIE Transaction; CAC Liquidity Transactions”).

6) On July 30, 2016, CIE announced that a consortium including an affiliate of Shanghai Giant Network Technology will acquire CIE’s social and mobile games business (the "SMG Business") for cash consideration of $4.4 billion (subject to customary purchase price adjustments).  The assets to be sold are limited to the SMG Business and will not include CIE's interest in the WSOP brand and other WSOP-related intellectual property or CIE's online real money gaming business. 

CIE may use the proceeds, subject to certain limitations, for certain permitted uses, including the release of certain bankruptcy claims and indemnification of Purchaser for any bankruptcy-related claims, as well as up to an aggregate amount not to exceed $1.85 billion for the payment of transaction expenses related to the Sale, distribution to minority shareholders or equity holders of CIE, tax payments, one or more distributions or advances to CEC or any of its subsidiaries for the payment of professional fees in an aggregate amount not to exceed $200 million and for the support or advancement of a proposed casino project in South Korea in an aggregate amount not to exceed $100 million.  At the Closing, the parties will also enter into intellectual property licenses with respect to the WSOP and other WSOP-related trademarks owned by CIE for use in Playtika's social and mobile games for a 3% royalty on net revenues.  The annual run rate of the SMG business in Q2 2016 (ending June 2016) was $950 million, so the 3% royalty is currently worth $28.5 million annually.

CAC has not disclosed the cost basis for CIE’s social and mobile games business (and IR confirmed they do not disclose the information).  The estimated cost basis of the assets in CIE has been reported to be $238 million (Playtika: reported $103m; Buffalo Studios: reported $45m; Pacific Interactive: reported up to $90m), and reports following the announcement of the acquisition estimated the cost basis to be $250 million.  To determine after tax proceeds, I used $238 million as the basis to be more conservative (marginally more capital gain is taxable than with a basis of $250m).  CGP owns 76% of CIE, so a $4.4 billion sale of CIE would generate proceeds net of taxes (assuming 35% corporate capital gains tax rate, with no state tax in Nevada) for CGP of $2.24 billion, and CACQ’s pro rata share of that amount is $868 million (worth $6.32 per CACQ share: 55% of the current stock price).

Valuation

The Operating Projections for New CEC can be found in Exhibit J of the Disclosure Statement linked above (starting on page 1,078) contains the “New CEC Financial Projections,” and the projections are also in this 8k:  https://www.sec.gov/Archives/edgar/data/858339/000119312516605797/d196895dex991.htm

The New CEC Projections have been adjusted to exclude the ownership percentage attributable to partners and management interest in CIE, Horseshoe Baltimore, and Punta del Este.  The EBITDA projection removes the projected rental payments to PropCo.  Assuming the sale of CIE is completed, I also deducted from the projection a projection for CIE’s EBITDA (net of management interest), and added back the 3% royalty on net revenues of the SMG business (which is included in the agreement to sell CIE for $4.4bn).

The New CEC Projections include projections for Cap Ex.  Since CEC may have been under-investing in cap ex in recent years due to its indebted financial condition, I considered historic cap ex in years prior to the LBO (2001-2008) in evaluating an estimate for maintenance cap ex.  The cap ex projection includes anticipated capital expenditures associated with Las Vegas room renovation projects. Management plans to finish renovating substantially all of its Las Vegas hotel rooms over the next 5-7 years.  The projections contemplate approximately 15K room renovations over the depicted horizon.  Additionally, the forecast includes spend required to properly maintain the facilities and sustain their current competitive positioning.  Because these renovations are required to maintain current competitive positioning, for conservatism, and in the context of the historic cap ex in years prior to the LBO (2001-2008), I assumed all of the projected cap ex to be maintenance cap ex. 

Cash Projection:  The projections assume an opening cash balance of $1,359 million which includes (i) minimum property cash and cage cash, (ii) cash that cannot be distributed from operating entities pursuant to debt agreements, (iii) cash held by CIE domestically and overseas, (iv) cash at insurance captives, and (v) cash at CES.  Assuming a sale of CIE is completed, I deducted the cash assumed to be held by CIE (assumed to be $100 million) from the opening cash balance, for a net opening cash balance of $1,259 million.

The Disclosure Statement (on page 15) includes an illustrative organizational chart summarizing the organizational structure of the reorganized entities, including their new capital structure, on the Effective Date.  The anticipated debt balance by entity is the following: 

The debt associated with the casino properties (CERP, CGPH Restricted, Cromwell, and Baltimore: total $6,769 million) will be transferred to PropCo in the restructuring.  So the total debt held by OpCo (New CEC) will be $3,121 million.

Net of the value of the after tax CIE Sale proceeds (both the dividend to CACQ and the remaining ownership held by CZR/New CEC), the valuation of New CEC implied by the current price of CACQ is a multiple of Enterprise Value / (EBITDA - Maintenance Cap Ex) of only 3.1x 2017 EBITDA - Maintenance Cap Ex, and 2.6x 2018 EBITDA - Maintenance Cap Ex: 

Assuming 1) the agreed CIE sale closes, and 2) the restructuring closes on the terms in the approved Disclosure Statement, the share price of CACQ that would reflect trading in line with the median of companies comparable to New CEC (Wynn Resorts, MGM Resorts, Las Vegas Sands, Pinnacle Entertainment, Boyd Gaming, Isle of Capri Casinos, and Penn National Gaming) is >$33 per share, or roughly 3x the current price, giving no credit for growth in EBITDA in 2018 and beyond.

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For conservatism, I have assigned no value in the analysis above to CEC’s NOLs.  But note that including CEOC, CEC had federal NOL carryforwards of >$4.2 billion as of December 31, 2015.  These NOLs will begin to expire in 2031. NOL carryforwards for the domestic subsidiaries for state income taxes were >$8.2 billion as of December 31, 2015.  These state NOLs will begin to expire in 2034.  It appears to be more likely than not that the benefit from these NOLs for the CEC tax consolidated group will not be realized.  NOL carryforwards of foreign subsidiaries were >$110 million as of December 31, 2015.  The majority of these foreign NOLs have an indefinite carryforward period.  

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It is noteworthy that in the formation of CACQ, a rights offering was used to effect a spinoff.  As many VIC members know, when using a rights offering to sell a spinoff to shareholders, a company does not need to seek the highest possible price (in contrast to selling a businesses to another company or in an IPO, both of which require the directors of the parent company as fiduciaries to seek the highest possible price).  The CACQ offering seemed to be intentionally confusing, and most commentators recommended that investors stay on the sidelines.

The rights offering included an oversubscription privilege, a sign of a bargain offering price.  When oversubscription privileges are involved, the less publicized the rights offering, the less likely it is for the rights holders to purchase stock in the rights offering, and the better the opportunity for rights offering investors to buy spinoff shares.  CACQ offered a short time window between the record date (Oct 17, 2013) and the expiration date for the rights offering (Nov 2, 2013), so there was only two weeks to give exercise instructions to your broker (to give them two days to exercise): less time than a typical rights offering. 

The S1 also obfuscated Apollo’s and TPG’s intent to purchase shares in the offering and over-subscription, but Apollo and TPG fully exercised both their initial stake and their over-subscription privileges.  The initial S1 for CACQ mentioned 19 times that TPG and Apollo planned to purchase “at least $500.0 million” of CACQ stock, which would have been less than their pro rata share including affiliates.  So numerous articles were written about Apollo and TPG investing less than their pro rata share, along with the message that since they were investing less than pro rata, other investors should do the same.  The S1 only once mentioned that “Affiliates of the Sponsors, which beneficially own approximately 70% of Caesars Entertainment’s outstanding shares of common stock as of the date hereof, have indicated that they currently intend to exercise their rights under the basic subscription right in full.”  The initial prospectus did not initially say anything about the intention of the Sponsors or Affiliates of the Sponsors in terms of the over-subscription privilege, and said “Affiliates of the Sponsors have not indicated whether they intend to exercise their over-subscription privilege.”

After CZR sold some stock, Apollo’s and TPG’s ownership were decreased from their stake in the original S1, and the final prospectus stated that “The Sponsors have advised Caesars Entertainment that the affiliates of the Sponsors holding common stock of Caesars Entertainment intend to exercise their basic subscription rights in full for $457.8 million (which would represent approximately 38.7% of our Class A common stock assuming the subscription rights are exercised in full by all holders of the subscription rights) and intend to exercise, if necessary, their over-subscription privilege for an amount such that subscription rights of at least $500.0 million are exercised in total, though they have not entered into any agreement to do so.”

But TPG and Apollo filed a 13D about their CACQ purchases on 11/27/13, and they and their affiliates ended up purchasing a total of $778 million of CACQ stock in the rights offering (the $457.8 million originally announced, plus $291 million invested by their co-investment affiliates, plus $29 million purchased in the over-subscription).  They believed the company was undervalued, and fully exercised their over-subscription privileges.

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Risks

The official committee of second-lien lenders in the Chapter 11 proceedings are pursuing fraudulent conveyance and other claims arising out of pre-petition transactions by CEC that the lenders contend stripped CEOC of valuable assets that could otherwise have been used to satisfy their claims.  These transactions lie at the heart of the conflicts that have impeded CEOC and its creditors from agreeing on a consensual reorganization plan.  A court-appointed examiner in the case (Richard Davis) concluded in a report filed in March 2016 that the company had claims of “varying strength” arising out of the transactions, placing potential damages arising out of claims rated as strong (meaning a high likelihood of success) or reasonable (meaning better than a 50/50 chance of success) in a range from $3.6–5.1 billion.  According to the second-lien committee, other potential claims for billions of dollars exist as well, although Davis did not quantify claims that he deemed to have less than a 50/50 chance of success.  Davis’ report found potential claims for both intentional and constructive fraudulent conveyances, and breaches of fiduciary duties.

CEOC has said that if it is unable to reach a reorganization settlement, it might seek to cram down the reorganization plan currently on the table if they can get creditors holding 80% percent of the debt to agree to the plan.  However, Judge Goldgar has made it clear that Caesars should try to negotiate a deal with the holdouts rather than pressure them into a cram down settlement. 

Senior first-lien creditors (including Elliott Management) hold $12 billion of CEOC’s $18.4 billion in total debt.  The second-lien lenders hold $5.3 billion in loans (28.5% of the total).  37% of second-lien lenders have agreed to the RSA, which along with almost all of the rest of the debt would get them over 80% of the total. Several investors who own second-lien debt (Paulson, Soros, and Canyon Capital) also own equity in CACQ, are amenable to a restructuring agreement, and have been buyers of CACQ in recent quarters.

On 6/15/16, the bankruptcy Judge Benjamin Goldgar temporarily halted lawsuits seeking $11.4 billion in damages from CZR, and urged the parties in the bankruptcy of CEOC to settle before an injunction expires in August.  Several hedge funds that own bonds are suing CZR in New York and Delaware, alleging it reneged on guarantees from bonds issued by CEOC prior to its bankruptcy.  Caesars is facing $7.7 billion in claims in New York and $3.7 billion in Delaware from the bondholder lawsuits.  Caesars has denied wrongdoing and said it could be forced into bankruptcy along with CEOC if courts rule in favor of the bondholders. 

CACQ is subject to fraudulent transfer litigation that could require it to return the assets acquired in the Transactions, or their value, to Caesars Entertainment.

A court could potentially “collapse” the component steps of the restructuring into a single set of integrated transactions to determine whether the restructuring overall affected a fraudulent transfer.  It is possible that CGP may have to return the assets or their value to Caesars Entertainment or be forced to pay additional amounts therefor.  Monetary damages are the most common remedy in fraudulent transfer cases, but in certain cases the court could require that the property that was subject to transfer be returned to CEOC, particularly where damages are difficult to calculate.   If the transferee cannot establish its good faith, the transferee will only be entitled to an unsecured claim for the amount of the consideration it paid. Where good faith is not established and monetary damages are awarded, the damage award thus would be based on the value of the asset transferred and the transferee would not be entitled to an offset in the amount of the consideration.  The fact that the transaction only proceeded once a fairness opinion from a reputable investment bank was provided, after genuine bargaining over the price, is important to the assessment of CGP’s good faith.

A bankruptcy court may conclude that the Transactions constituted a disguised financing rather than a true sale and as a result CACQ would no longer have ownership and control over assets sold or contributed to Growth Partners to the extent as it does now.

In such case, the court would deem CGP’s assets as belonging to CEC, and consider CAC to be CEC’s lender to the extent of the purchase price CGP paid for those assets. While CACQ would have a claim against CEC for the amounts paid to CEC for the assets, it would no longer have ownership and control over the assets to the same extent as it does now.  Moreover, if CACQ’s claim against Caesars Entertainment is considered a financing, there is no guaranty that it will be deemed a secured claim entitled to a priority right of repayment from the assets, rather than a general unsecured claim against the bankruptcy estate that shares pro rata with other creditors in any recovery from the residual value of the bankruptcy estates.

A bankruptcy court could substantively consolidate the bankruptcy estates of Caesars Entertainment and its debtor subsidiaries with Growth Partners, which would, among other things, allow the creditors of the bankrupt entities to satisfy their claims from the combined assets of the consolidated entities, including CGP.

Even though CGP has certain bankruptcy remote features that restrict its ability to file for bankruptcy relief, there can be no assurance that a bankruptcy court will not direct CGP’s substantive consolidation with CEC or a subsidiary of CEC in a bankruptcy case of CEC or such subsidiary even if CGP does not itself file a bankruptcy petition.

The Official Committee of Second Priority Noteholders filed a standing motion in bankruptcy court on May 13, 2016 seeking standing to commence claims on behalf of CEOC's estate and seeks recovery of assets transferred from CEOC alleging claims on behalf of CEOC's estate ranging in value from $8.1 billion to $12.6 billion against all defendants, which included “In the event avoidance or rescission of the Contested Transfers, or any of them, is not practicable, award Plaintiff monetary damages in an amount sufficient to compensate Plaintiffs for the loss of the transferred assets in an amount equal, as to each asset transfer, to the greater of: (i) the value of each such asset transferred as of the date of entry of judgment, or (ii) the value of each such asset transferred as of the date of such transfer.”  Since rescission of the transfers that established CGP and CAC are most likely not practicable, the most likely risk is that CGP could be held liable for damages in an amount sufficient to compensate Plaintiffs for the loss of value relative to the price paid for the transferred assets, rather than being at risk of having the transactions rescinded.   

CEC and CGP have increased the amount of their contributions to creditors in a potential restructuring numerous times already, and likely will have to offer additional contributions to get to an agreed settlement.  The contributions are currently in the range of the potential damages arising out of claims rated as strong (meaning a high likelihood of success) or reasonable (meaning better than a 50/50 chance of success) estimated by the court-appointed examiner. 

Catalyst

1) Closing the sale of CIE's social and mobile games business, followed by a dividend to CACQ shareholders of CACQ’s pro rata share of the net cash proceeds from the CIE Transaction (net of taxes, expenses, escrow, etc.).  Value of $6.32 per CACQ share: 55% of the current stock price.

2) Reaching consensual agreements with creditors for a restructuring, which would include a CACQ / CZR merger, resulting in CACQ shareholders owning 27% of the post-merger entity.