In this owner’s case, yes, bankruptcy Subchapter 5 of Chapter 11, was the solution. (his debt was just over $6 MM).

If you’re not familiar with this law passed last August, “Subchapter V of the bankruptcy code’s Chapter 11. Qualifying debtors are freed from the requirements for an estate-funded creditors’ committee and court approval for restructuring plan voting materials. The law also empowers an independent trustee to oversee proceedings and expedite case resolution.

Crucially, the act permits debtors to propose and confirm plans without the approval of any impaired creditor groups, while keeping equity in the business to maintain it going forward.”

Bloomberg Law News, April 15th, 2020

The Cares Act established a $7.5 MM yearly debt cap for these small businesses.

“Under Subchapter V, a debtor has 90 days to file its reorganization plan of reorganization or ask the court for an extension if faced with it faces circumstances for which it “should not justly be held accountable.”

Bloomberg Law, April 15th 2020

Indeed small businesses have been the most stressed out during the Covid-19 pandemic. They had to do soft openings, then closing again, reopening again, testing the waters…this unpredictability has put many under extreme stress and a fight for survival. People have started testing out Subchapter 5, which may breath new life into their business.

 “After more than a year of standing firm, Apollo and TPG caved to creditors demands and forked over more cash as part of Caesars’ Chapter 11 reorganization plan — and gave [junior] bondholders an equity stake in the casino’s non-bankrupt unit.  

 The move means investors in the PE giants’ funds will see their return on investment slashed — to about 27 cents on the dollar for some.” (NY Post, Oct. 3rd, 2016)

         Owners Apollo and TPG lost $6 Bn they sunk into the 2008 buyout. 

“Apollo’s Fund VI, raised in 2006, has met expectations by generating an 8.8 annual internal rate of return, or IRR, according to the California Public Employees’ Retirement System. TPG’s fifth fund lags with a 3.8 annual IRR as of March 31.” (NY Post)

The junior creditors (also known as second lien creditors), led by aggressive hedge funds such as Appaloosa Management and Oak Tree Capital will get about 66 cents on the dollar, or seven times what they were first offered (NY Times). Apollo and TPG will be left with a less than 10% stake in the reorganized company.

Kirkland & Ellis LLP represents CEOC in the $18 billion bankruptcy.