Congressmen call on IRS to reject Caesars REIT plan
A group of US Congress members has urged tax authorities to reject a major component of the restructuring of Caesars Entertainment Corporation’s operating unit.
According to the Wall Street Journal newspaper, the 15 lawmakers, in a letter to Treasury Secretary Jacob Lew, said the casino operator should not be allowed to split into two companies in its $18 billion (€15.9 billion) chapter 11 restructuring.
The 14 Democrats and one Republican are concerned that the proposed real-estate investment trust (REIT) that would own Caesars’ casinos “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 US and its private-equity owners”. REITs, introduced to encourage small businesses to invest in real estate, are favoured by investors because they pay little, if any, corporate taxes and must distribute at least 90% of their income to investors via dividends.
The group of Congressmen also suggested that the planned REIT creates the risk of allowing a gaming company “to avoid Federal Trade Commission market-concentration concerns and state laws designed to ensure companies do not amass undue economic influence over local gaming markets”.
The REIT is one of the main components of the Caesars unit’s restructuring plan, which proposes to slash some $10bn in debt off its books. Certain Caesars creditors would take ownership of the REIT as payment on their debts.
“The proposed financial restructuring of [the Caesars unit], including the formation of a REIT, is designed to significantly reduce debt at [the Caesars unit], preserving thousands of jobs across the Caesars network, and maximising recoveries to creditors,” a Caesars spokesman told the Wall Street Journal.
“Efforts to derail this restructuring are ill intended and could cause very negative consequences for many stakeholders.”
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