Top Highlights

• Apollo had become a trailblazer in the so-called “distress for control” market where it could buy up loans and bonds at steep discounts. When a troubled company restructured its debt, the paper that creditors had accumulated could then be swapped for stock in the reorganized company. If the company then turned around and improved, those credit inve...
• The hotel sector was already utilizing the so-called “OpCo/PropCo” model where land and structures were put into a separate “PropCo”—or property company—called a real estate investment trust. The REIT leased the buildings back to the “OpCo,” which managed the hotel. REITs avoided corporate income tax and instead paid out big dividends. The package ...
• PIK stood for payment-in-kind. Holders of this debt were owed a coupon payment of around 11 percent each year. However, Caesars had an option. Instead of paying in cash, it could issue new debt instead. If the PIK option was invoked in a given year, the debt balance to be repaid would grow from $1.5 billion to $1.65 billion to reflect the interest ...
• As expected, the six banks who participated in the Harrah’s 2008 LBO financing took huge baths on the deal, with paper losses extending into the billions.
• These so-called “hung bridges,” bridge loans that could not be quickly syndicated to mutual funds and other institutional buyers or refinanced as junk bonds now created an opportunity for a particularly aggressive type of scavenger: the distressed debt investor.