Caesars in 'painstaking' process to restore lost retirement payments

29 May 2015

The general counsel for Caesars Entertainment Corporation told the Nevada Gaming Commission and Control Board on Thursday that the casino company was going through a “painstaking” process to determine how its bankrupt division can restore lost retirement and deferred compensation payments to current and former employees.

The issue came up during a routine suitability finding for one of Caesars’ executives.

Caesars halted some $78.6 million in monthly payments in January when it filed a Chapter 11 bankruptcy for its largest operating unit. This month, the company resumed payments to workers in two of five deferred compensation plans when it was determined the parent company was partially liable for those funds.

“That was step one and there are more steps to be taken,” Caesars General Counsel Tim Donovan told the Gaming Commission.

Caesars said in March the payments were halted because, under bankruptcy law, a company in a Chapter 11 reorganization, can’t separate supplemental retirement plans from other unsecured creditors.

Nevada gaming regulators chastised the company in March after several of the workers who lost their monthly checks publicized their plight. Gaming Commission Chairman Tony Alamo Jr. called the matter an “embarrassment.”

Donovan told the commission Thursday the company restored monthly payments to roughly 88 percent of the current retirees, primarily those who were part of two deferred compensation plans for executives and directors. Payments also resumed for six individuals “who had contracts” with Caesars Entertainment.

According to the company’s quarterly earnings statement filed with the Securities and Exchange Commission, Caesars recorded $53 million in liabilities under the deferred compensation plans.

Donovan said the company was currently looking at two other deferred compensation plans which have 23 participants.

“We’re hoping to have some good news on that,” he said.

Deferred compensation plans allow employees to set aside a portion of their salaries, bonuses, stock options and other payments to draw on after retirement. The funds are not taxed until they are taken out of the plan.

The other issue covers “69 individuals” who had various supplemental retirement plans inherited by the company over the years. Combined, the group is owed $33 million.

Donovan said those obligations “rested” with Caesars Entertainment Operating Co., the division that was placed into bankruptcy with hopes of slicing some $10 billion of debt. He told the Gaming Commission that 39 of the workers were former Hilton employees. Many of the plans are simply letters outlining the payments.

“We’re looking at each plan,” Donovan said. “Some of the employees had direct agreements. This is the step we’re currently going through.”

Caesars’ bankrupt unit carries $18.4 billion of the company’s total debt. The bankruptcy restructuring, which could take up to a year to complete, would reduce the division’s debt to $8.6 billion. Annual interest expense would be reduced by about 75 percent, from $1.7 billion to $450 million.

Related Links
Nevada Gaming Commission and Control Board Gaming Vendor Information
Caesars Entertainment Ownership Details


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