Merger Related Transactions

6 Months Ended

Jun. 30, 2020

Business Combinations [Abstract]

Merger Related Transactions

Merger Related Transactions

Merger with Caesars Entertainment Corporation

On July 20, 2020, the Merger was consummated and Former Caesars became a wholly-owned subsidiary of the Company. The strategic rationale for the Merger includes, but is not limited to, the following:

•Creation of the largest owner, operator and manager of domestic gaming assets

•The largest and most diversified domestic footprint

•Iconic brands, rewards program and new gaming opportunities expected to enhance customer experience

•Realization of significant identified synergies

Based on the closing price of $38.00 per share of Company common stock, par value $0.00001 per share (“Company Common Stock”), reported on NASDAQ on July 17, 2020, the aggregate implied value of the aggregate merger consideration paid to former holders of Former Caesars common stock in connection with the Merger was approximately $8.46 billion, including approximately $2.37 billion in the Company Common Stock and approximately $6.09 billion in cash. The aggregate merger consideration transferred also included the repayment of certain outstanding debt balances of Former Caesars and the replacement of equity awards of certain employees attributable to services provided prior to the Merger.

The cash consideration paid in the Merger was $12.41 per share (inclusive of the applicable ticking fee) of Former Caesars common stock for which cash consideration was payable and the stock consideration per share of Former Caesars common stock for which stock consideration was payable was 0.3085 shares of Company Common Stock, with a value equal to approximately $12.41 in cash (based on the volume weighted average price per share of Company Common Stock for the 10 trading days ending on July 16, 2020). Following the consummation of the Merger, the Company’s and Former Caesars’ stockholders hold approximately 56% and 44%, respectively, of the outstanding shares of Company Common Stock.

The major classes of assets acquired through the Merger include cash, cash equivalents and restricted cash, accounts receivable, including receivables from affiliates, property and equipment, goodwill and intangible assets, and other assets. The major classes of liabilities assumed through the Merger include accounts payable, accrued expenses, contract liabilities,

financing obligations and long-term debt, which includes $1.1 billion in aggregate principal amount of 5% convertible notes due 2024 that are convertible into the weighted average of the number of shares of Company Common Stock and amount of cash actually received by holders of common stock of Former Caesars that made elections for consideration in the Merger.

Given the short period of time from the Merger completion date and the date of these consolidated financial statements and the size and complexity of the transaction, the initial accounting for the business combination is incomplete at this time. The Company is not able to provide the valuation of certain components of consideration transferred or provide the allocation of consideration paid to the assets acquired or liabilities assumed. Supplemental pro forma revenue and earnings of the combined company are predicated on the completion of the business combination accounting and allocation of consideration.

The Company recognized acquisition-related transaction costs of $12.7 million and $22.0 million for the three and six months ended June 30, 2020, respectively, and $4.5 million for the three and six months ended June 30, 2019.

Debt and Financing Activity

On July 6, 2020, a wholly-owned subsidiary of the Company issued $3.4 billion aggregate principal amount of 6.250% Senior Secured Notes due 2025 (the “2025 Secured Notes”) and $1.8 billion aggregate principal amount of 8.125% Senior Notes due 2027 (the “2027 Senior Notes”). The Company assumed the obligations under the 2025 Secured Notes and 2027 Senior Notes upon consummation of the Merger. In addition, Caesars Resort Collection (“CRC”), a subsidiary of Former Caesars, issued $1.0 billion aggregate principal amount of 5.750% Senior Secured Notes due 2025 (the “CRC Secured Notes”).

On July 20, 2020, in connection with the closing of the Merger, the Company entered into a new credit agreement which provides a five-year senior secured revolving credit facility for an aggregate principal amount of $1.0 billion (the “ERI Revolving Credit Facility”) and an additional revolving credit facility commitment under the ERI Revolving Credit Facility in an aggregate principal amount equal to $185 million, and CRC entered into an incremental agreement to its existing credit agreement dated as of December 22, 2017 for an aggregate principal amount of $1.8 billion of incremental term loan and an additional $25 million of revolving credit facility commitments. The additional capacities of $185 million under the ERI Revolving Credit Facility and $25 million under the existing CRC revolving credit facility are subject to approval from certain gaming authorities which we expect to receive in the third quarter of 2020. In addition, the borrowing capacity and obligations under CRC’s existing $1.0 billion revolving credit facility remain outstanding following the consummation of the Merger.

A portion of the proceeds from these arrangements, as well as cash on hand of the Company, was used (a) to fund a portion of the cash consideration of the Merger, (b) to prepay in full the loans outstanding and terminate all commitments under the Company’s existing Credit Agreement, dated as of April 17, 2017, (c) to satisfy and discharge the Company’s 6% Senior Notes due 2025, the Senior Notes due 2026, and the 7% Senior Notes due 2023, (d) to repay $975 million of the outstanding amount under CRC’s existing revolving credit facility, (e) to repay in full the loans outstanding and terminate all commitments under the CEOC, LLC Credit Agreement, dated as of October 6, 2017, (f) to pay fees and expenses related to the financing arrangements, and (g) for general corporate use. See Note 11 for details.

VICI Transactions

In connection with the closing of the Merger on July 20, 2020, the Company consummated a series of transactions with VICI in accordance with the Master Transaction Agreement (“MTA”) entered on June 24, 2019 and the Purchase and Sales Agreement entered on September 26, 2019. The Company consummated the sale leaseback transactions related to Harrah’s New Orleans, Harrah’s Laughlin and Harrah’s Resort Atlantic City, including the Harrah’s Atlantic City Waterfront Conference Center, for approximately $1.82 billion of net proceeds. Additionally, the Company received a one-time payment from VICI of approximately $1.38 billion for amendments to VICI lease agreements. The Caesars Palace Las Vegas (“CPLV”) Lease with VICI was amended to include Harrah’s Las Vegas (“HLV”) under the CPLV lease and increased HLV’s annual rent by $15 million and CPLV’s annual rent by $84 million. In addition, Harrah’s New Orleans, Harrah’s Laughlin, Harrah’s Resort Atlantic City and the Harrah’s Atlantic City Waterfront Conference Center were added to the Non-CPLV lease with VICI, with an increase in total aggregate annual rent for these properties of $154 million. The CPLV, Non-CPLV and Joliet lease agreements, as well as the Golf Course Use Agreement, were extended such that there will be 15 years remaining until the expiration of the initial term. The amendment also contains a put-call agreement related to the Centaur properties pursuant to which CRC may require VICI or its applicable affiliate to purchase and lease back (as lessor) to the Company or its applicable affiliate(s) the real estate components of the gaming and racetrack facilities of Hoosier Park Racing & Casino (“Hoosier Park”) and Indiana Grand Racing & Casino (“Indiana Grand”) and VICI or its applicable affiliate may require CRC to sell to VICI or its affiliate(s) and lease back (as lessee) the real estate components of such gaming and racetrack facilities.

On June 15, 2020, the Company entered into a non-binding letter of intent with VICI to borrow a new 5-year, $400 million mortgage loan (the “Convention Center Mortgage Loan”) and sell to VICI approximately 23 acres of land in the vicinity of, or adjacent to, The LINQ, Bally’s Paris and Planet Hollywood in Las Vegas, Nevada and commonly known as the

Eastside Land (the “Eastside Land Sale”). The Convention Center Mortgage Loan and the Eastside Land Sale are expected to close concurrently and are subject to customary closing conditions, including completion of due diligence, and negotiation of definitive documents and receipt of regulatory approvals. These transactions are expected to close in the third quarter of 2020.