Leon Black's Apollo Global Management on Thursday will put the biggest unit of casino giant Caesars Entertainment into bankruptcy, it said Wednesday.
The move, while an embarrassing stumble for Apollo — which bought America's No. 1 casino chain in 2008 and loaded it up with debt — will salvage its investment at the expense of most of Caesars' creditors, sources said.
If Black's Apollo wins Bankruptcy Court approval of Caesars' reorganization plan, it will owe a debt of gratitude to Lloyd Blankfein's Goldman Sachs, sources said.
Goldman was involved in a key part of Caesars' restructuring last Aug. 12, sources said.
At that time, the casino paid 100 percent value to about half the holders of a $315 million loan. In exchange for getting paid par on the loan, which was then trading at less than 50 cents, the group — which included Goldman, sources said — agreed to eliminate a guarantee only it held against the parent company.
Leon BlackPhoto: Reuters
Other loan holders in the group were left with debt that is now worth only about 14 cents on the dollar, sources said.
David Tepper's Appaloosa Investment and other junior creditors this week objected to the plan to put the Caesars Entertainment Operating Company into bankruptcy.
Tepper feels he is being cheated out of a larger payout because of assets being shifted outside of CEOC.
The move by Goldman and others to eliminate the guarantee hurt Tepper's chances at a greater payout.
CEOC owns 20 US casinos, including two of Atlantic City's eight remaining casinos — Bally's and Caesars.
Caesars co-owners Apollo and TPG Capital are planning to salvage more than half of their investment in Caesars by splitting it in three and shifting some of the better assets to the subsidiaries they are not putting into bankruptcy.
In a confidential document reviewed by The Post, TPG estimates its $1.74 billion equity investment in Caesars as of June 30 was worth $976 million, a 56 percent recovery.
Meanwhile, junior CEOC creditors, like Tepper, stand to recover only 9 percent of their $5.3 billion, a gaming analyst said.
Debt typically gets paid before equity.
Although Goldman is not named in court papers, an unidentified bond holder sold its notes at 69.9 percent just before Aug. 12 — while they were trading at less than 50 percent, alleges a suit filed by creditors in that loan group not given the plump offer.
Goldman was the only lender in that creditor group who would have that motivation, sources said.
"Our belief is Goldman accumulated a position in the bonds [reaching a deal with Caesars] but could not be part of the vote [to strip out certain covenants]," a source close to the plaintiffs said.
A Goldman spokeswoman declined comment.
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