Tags: caesars | casino | reit | invest

US Lawmakers Oppose Caesars' Casino REIT Plan

Image: US Lawmakers Oppose Caesars' Casino REIT Plan

Thursday, 02 Jun 2016 07:28 AM


U.S. Congress members urged Treasury Secretary Jacob Lew to deny Caesars Entertainment Corp. a favorable tax ruling relating to the casino operator's plan to create a trust to own its hotels and resorts, saying that doing so would amount to a taxpayer subsidy.

In a May 26 letter viewed by Reuters on Wednesday, 15 lawmakers said Caesars' plans to reorganize its bankrupt main operating unit into a casino operator and creditor-controlled real estate investment trust (REIT) abuses the unit's original intent of allowing small investors to diversify into real estate.

Caesars put the unit into bankruptcy early last year. The proposed REIT spinoff provides favorable tax treatment and such trusts are more highly valued by investors, increasing the recovery for creditors who are owed $18 billion.

The company last year applied for what is known as a private letter ruling from the Internal Revenue Service to confirm that the REIT would be treated as a tax-free separation. Caesars has warned that if it fails to get tax-free status it could incur significant liabilities which could undermine the value of the reorganization.

"The REIT would effectively shelter a considerable portion of the casinos' profits, thus functioning as a taxpayer-funded subsidy to one of the largest casino companies in the U.S. and its private equity owners," said the letter.

Caesars and the Treasury Department declined to comment.

Congress took steps to curb REITs last year, but Caesars was exempted because it had already applied for a ruling from IRS.

Caesars is controlled by Apollo Global Management and TPG Capital, which created the company from the $31 billion leveraged buyout of Harrah's Entertainment in 2008. The pair have been embroiled in a costly and bitter legal battle with its hedge fund creditors over the Caesars bankruptcy.

The members of Congress also said the REIT structure could be used by to sidestep antitrust review.

The letter was signed by 14 Democrats and one Republican, Representative Frank LoBiondo, who represents Atlantic City, New Jersey, where Caesars owns the Bally's and Caesars casinos. An affiliate of Caesars also owns a Harrah's casino in Atlantic City.

© 2017 Thomson/Reuters. All rights reserved.

 
1Like our page
2Share
InvestingAnalysis
U.S. Congress members urged Treasury Secretary Jacob Lew to deny Caesars Entertainment a favorable tax ruling relating to the casino operator's plan to create a trust to own its hotels and resorts, saying that doing so would amount to a taxpayer subsidy.
caesars, casino, reit, invest
349
2016-28-02
Thursday, 02 Jun 2016 07:28 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved