On October 7, 2015 the LSTA issued a Market Advisory regarding the treatment of certain expected payments under the Restructuring Support and Forbearance Agreement, dated as of August 21, 2015, among Caesars Entertainment Corporation (CEC), Caesars Entertainment Operating Company, Inc. (CEOC), and a majority of first lien bank lenders.
Pursuant to the terms of the RSA, each first lien bank lender that signs the RSA agrees to transfer to CEC, upon emergence from bankruptcy, 100% of its guaranty claims against CEC in exchange for a purchase price calculated in the manner set forth in the RSA. In addition, each first lien bank lender who has signed the RSA on or before September 8, 2015, shall receive an upfront payment equal to its pro rata share of $62.5 million. Such upfront payment will later be credited against the purchase price paid in respect of the relevant guaranty claims.
The LSTA recommends in the Market Advisory that the purchase price (including the upfront payment) be treated as a Non-Recurring Fee (as defined in the LSTA Standard Terms and Conditions) and that, accordingly, any such payment made after the trade date be for the account of the buyer. The LSTA further recommends that all distressed Trade Confirmations and Purchase and Sale Agreements include a seller representation indicating when, if applicable, the debt being transferred became subject to the RSA. Purchase and Sale Agreements should include an additional representation regarding the amount of upfront payment received (if any) and the principal amount of first lien bank debt to which such upfront payment applies.
We expect that the LSTA Market Advisory will resolve current uncertainty in the market regarding these payments and facilitate settlement of open Caesars trades.