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Caesars second lien noteholders confirm support for economic terms of consensual chapter 11 plan

September 2016

Jones Day represents the Official Committee of Second Priority Noteholders ("Second Priority Noteholders") of Caesars Entertainment Operating Company ("CEOC"), the casino operator who filed for bankruptcy in January 2015.

On September 27, 2016, the Second Priority Noteholders reached an agreement with CEOC, Caesars Entertainment Corporation ("CEC"), Caesars Acquisition Company ("CAC"), and certain entities that own interests in CEC to revise the economic terms of the distributions included in the plan of reorganization that was previously filed by CEOC and to settle claims of the Second Priority Noteholders against CEC under guarantees of the Second Priority Notes that CEC has asserted were terminated in 2014. Confirmation of the revised plan and the distributions specified in the plan are subject to numerous conditions, including confirmation by an order of the United States Bankruptcy Court for the Northern District of Illinois.

At midpoint values, the distribution to the Second Priority Notes class totals $3.62 billion, or 65.5 cents on the dollar (exclusive of $47 million in reimbursement of expenses incurred by holders of Second Priority Notes and indenture trustees), an increase of $1.51 billion from the distributions accorded to that class under CEOC's most recently filed plan. At the beginning of the chapter 11 cases for CEOC and its subsidiaries, the debtors had agreed with other constituencies to offer the Second Priority Notes class equity estimated to be worth approximately $487 million, or 9 cents on the dollar. As part of the bankruptcy cases, an independent, court-appointed Examiner concluded that the estates had significant claims related to pre-petition transactions that stripped assets from CEOC for the benefit of CEC, CAC, Apollo Global Management, and TPG Capital. Specifically, the Examiner found that "strong" or "reasonable" claims ranged from $3.6 billion to $5.1 billion. The Examiner's report was very helpful in focusing the parties on the value of these claims.

The agreement contemplates the filing of a revised plan of reorganization that will provide for a distribution to holders of Second Priority Notes of: (i) $344.6 million in cash (ii) $899 million principal amount of 5% New CEC Convertible Notes, which is convertible into 11.02% of common shares of New CEC, before taking into account the buyback of New CEC common shares described herein and (iii) 32.02% of the fully diluted pre-buyback of New CEC common shares (37.11% pre-dilution from the New CEC Convertible Notes) having a midpoint valuation of $2.18 billion. The revised plan will also provide that New CEC will purchase a minimum of $905.1 million and a maximum of $1.09 billion of the New CEC common shares to be issued pro rata to the Second Priority Notes. Assuming the full $1.09 billion buyback of equity issued to the Second Priority Notes, distributions to the Second Priority Notes will include: (i) $1.43 billion in cash; (ii) $899 million principal amount of 5% Convertible Notes (valued at $1.09 billion), which is convertible into 14.93% of New CEC common shares assuming the maximum cash buyback of New CEC common shares; and (iii) 19.07% of the fully diluted of New CEC common shares (23.42% pre-dilution from the New CEC Convertible Notes) having a midpoint valuation of $1.10 billion.

For additional information about this matter, please contact: Bruce Bennett, Sidney P. Levinson, Geoffrey S. Stewart

Client(s): Caesars Entertainment Corporation Noteholders