Description of Business (Notes)

12 Months Ended

Dec. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

Description of Business

Organization

CEC is primarily a holding company with no independent operations of its own. Caesars Entertainment operates the business primarily through its wholly owned subsidiaries CEOC, LLC (“CEOC LLC”) and Caesars Resort Collection, LLC (“CRC”). Caesars Entertainment has a total of 53 properties in 14 U.S. states and five countries outside of the U.S., including 50 casino properties. Nine casinos are in Las Vegas, which represented 45% of net revenues for the year ended December 31, 2018.

We lease certain real property assets from VICI Properties Inc. and/or its subsidiaries (collectively, “VICI”).

New Transactions with VICI

Harrah’s Philadelphia Real Estate Sale and Leaseback

On December 26, 2018, we sold all land and real property improvements used in the operation of Harrah’s Philadelphia Casino and Racetrack (“Harrah’s Philadelphia”) as part of a sale and leaseback transaction with VICI for $242 million. We continue to operate Harrah’s Philadelphia under the terms of a long-term lease agreement relating to certain of our other domestic properties. We determined that this transaction did not qualify for sale-leaseback accounting. The Harrah’s Philadelphia real estate assets remain on our Balance Sheet at their historical net book value and are depreciated over their remaining useful lives, while a financing obligation was recognized for the proceeds received. See Note 10 for additional information.

Modifications to Lease Agreements with VICI

In connection with the Octavius Tower sale discussed below and the Harrah’s Philadelphia transaction discussed above, on December 26, 2018, the Company and VICI consummated modifications to certain of our existing lease agreements for consideration of $159 million to VICI, which reduced our financing obligation. The modifications, among other things, bring certain of the lease terms into alignment with other master leases in the sector and the long-term performance of the properties and create additional flexibility to facilitate our future development strategies. See Note 10 for additional information.

Sale of Octavius Tower at Caesars Palace

On July 11, 2018, we sold Octavius Tower at Caesars Palace (“Octavius Tower”) to VICI for $508 million in cash. Proceeds from the transaction were used to partially fund the closing of CEC’s acquisition of Centaur Holdings, LLC (“Centaur”). We continue to operate the Octavius Tower under the current terms of the long-term lease agreement with VICI relating to Caesars Palace. We determined that this transaction did not qualify for sale-leaseback accounting. The Octavius Tower real estate assets remain on our Balance Sheet at their historical net book value and are depreciated over their remaining useful lives, while a financing obligation was recognized for the proceeds received. See Note 10 for additional information.

Acquisition of Centaur Holdings, LLC

On July 16, 2018, we completed the acquisition of Centaur. Centaur operated Hoosier Park Racing & Casino in Anderson, Indiana, and Indiana Grand Racing & Casino in Shelbyville, Indiana. See Note 4 for additional information.

CEOC’s Emergence from Bankruptcy and CEC’s Merger with Caesars Acquisition Company

Caesars Entertainment Operating Company, Inc. (“CEOC”) and certain of its U.S. subsidiaries (collectively, the “Debtors”) voluntarily filed for reorganization on January 15, 2015 (the “Petition Date”), at which time CEC deconsolidated CEOC. The Debtors emerged from bankruptcy and consummated their reorganization pursuant to their third amended joint plan of

reorganization (the “Plan”) on October 6, 2017 (the “Effective Date”). As part of its emergence from bankruptcy, CEOC reorganized into an operating company (“OpCo”) separate from its real property assets (“PropCo”). OpCo was acquired by CEC on the Effective Date and immediately merged with and into CEOC LLC. See Note 4 for additional information. CEOC LLC operates the properties and facilities formerly held by CEOC and leases the properties and facilities from VICI.

On the Effective Date, Caesars Acquisition Company (“CAC”) merged with and into CEC, with CEC as the surviving company (the “CAC Merger”). See Note 4 for additional information. The CAC Merger was accounted for as a reorganization of entities under common control, which resulted in CAC being consolidated into Caesars at book value as an equity transaction for all periods presented.

Summary of CAC Merger and CEOC Emergence Transactions
(In millions)	CAC Merger		Restructuring Support Settlement		OpCo Acquisition		Total
Cash	$	—	$	2,787	$	700	$	3,487
CEC common stock (value)	2,894		3,435		1,774		8,103
CEC convertible notes (fair value)	—		2,172		—		2,172
Other consideration	—		177		—		177
Total consideration	$	2,894	$	8,571	$	2,474	$	13,939
CEC common stock (shares)	226		268		139		633

Restructuring and Support Expenses

Prior to the Effective Date, CEC made material financial commitments to support the reorganization of CEOC as described in the Plan. Our estimate of restructuring and support expenses was determined based on the total value of the consideration that was required by CEC to resolve claims and potential claims related to the reorganization.

Restructuring and support expenses for the years ended December 31, 2017 and 2016 were $2.0 billion and $5.7 billion, respectively, recorded in the Statements of Operations. These were primarily composed of accruals for (i) forbearance fees and other payments to CEOC’s creditors that were settled in cash, (ii) a bank guaranty settlement related to the modification of CEC’s guarantee under CEOC’s senior secured credit facilities that was settled in cash, (iii) payments of CEOC’s creditors’ expenses, settlement charges, and other fees that were settled in cash, (iv) the issuance of CEC common stock, (v) the issuance of the $1.1 billion aggregate principal amount of 5.00% convertible senior notes maturing in 2024 (the “CEC Convertible Notes”) (see Note 8 and Note 12), and (vi) the call right to purchase and leaseback the real property assets associated with Harrah’s Atlantic City, Harrah’s Laughlin, and Harrah’s New Orleans (the “VICI Call Right”) as other consideration (see Note 9). The total value of the consideration that was provided by CEC as of the Effective Date was $8.6 billion. See Restructuring Support Settlement in the table above.