Sunday, December 6, 2015

Caesar's Bond Battle

Forbes reported on the two sides fighting over Caesar's Entertainment bonds and the legal ploys involved, which included a possible House amendment to tip the scales. Each side has a storied group of billionaires.

First lien holders include Brigade Capital Management, Aurelius Capital and the largest first lien holder, billionaire Paul Singer’s Elliott Capital Management; second lien holders include Howard Marks’ Oaktree Capital Management, Centerbridge Partners, Appaloosa Management and Tennenbaum Capital Partners.

The three biggest shareholders of the CEC parent are private equity backers Apollo (Leon Black) and TPG Capital (David Bonderman), and the nearly $20 billion hedge fund Paulson & Co. 
Alabama Senator Richard Shelby introduced a bill amendment that would have stacked the deck in favor of the PEU boys, Apollo, TPG and Paulson & Co.  

Paulson & Co. is the fifth-largest contributor to Sen. Shelby’s leadership political action committee for the 2016 election cycle, donating $52,500.
It's not clear how many Apollo or TPG affiliates support the Alabama senator.  Fortunately the amendment did not make the final bill, but the moves portend the PEU boys will seek the intervention of elected officials on specific deals.  

HuffPo spun the amendment as private equity trying to harm pension funds.  It all depends on which side of the bankruptcy the pension fund sits.  Do pension funds hold more junk bonds than private equity investments?  

It would be an odd time for elected officials to remove investor protections in the case of bankruptcy, especially given the expected wave of energy related implosions due to low oil and gas prices.  The PEU boys have long profited from politicians willing to serve their interests.  The failed amendment is but on step on that path.     

Recall that financial crises arise when the big money boys no longer trust one another to make good on their debts or their bets.