When Apollo Global Management and TPG Capital bought what was Harrah’s Entertainment for about $31 billion, the two firms took control of the world’s biggest casino operator during a heady time for daring leveraged buyouts.
But in an agreement with creditors of the bankrupt casino empire — now called Caesars Entertainment — the private equity titans will give up most of their stake in the company to help it emerge from Chapter 11 protection.
The complicated agreement, announced on Tuesday, settles a long-running battle between the private equity firms and a host of creditors, a fight in which Apollo and TPG were forced to concede ground to stave off a potentially more disastrous defeat during adverse legal decisions in the bankruptcy case.
Caesars became a symbol of the excesses of the leveraged buyout boom. The company made deals that were struck before the 2008 financial crisis with the help of freely available debt, only to struggle when business slowed down. Companies like Energy Future Holdings, a huge Texas power company, eventually sought relief in bankruptcy court.
For Apollo and TPG, trouble began soon after they closed their takeover of Caesars, as the financial crisis began. The casino company grappled with a slowdown in gambling and a subsequent withering of profit, leaving it unable to pay down its enormous debt load.