Caesars Entertainment Corp., largest owner of casinos in the U.S., will sell four properties to an affiliate for $2.2 billion, freeing up cash as the company works to restructure $24.5 billion in debt.

Caesars is selling the Bally’s, Quad and Cromwell casino- hotels in Las Vegas, as well as Harrah’s New Orleans, to the affiliate, Caesars Growth Partners LLC, according to a statement today. The transaction leaves Caesars Entertainment Operating Co., the company’s largest subsidiary, with more than $3 billion in cash, some of which will be used to reduce debt.

The deal provides Caesars with flexibility as it weighs further restructuring. Apollo Global Management LLC and TPG Capital acquired the company in a $30.7 billion buyout in 2008, just as the financial crisis gripped Las Vegas. Caesars has since sold assets, bought back debt at a discount, sold stock to the public and refinanced loans.

“We have a lot of latitude in how proceeds of this magnitude will be spent,” Chief Executive Officer Gary Loveman said on a conference call today. “Some portion will go to the repayment of bank debt,” he said, declining to provide further details.

Rights Offering

Caesars Growth Partners was created last year to aid in debt reduction. The parent company owns 58 percent of Caesars Growth, which also holds the company’s online gambling operations and the Planet Hollywood Casino in Las Vegas. The remaining 42 percent is owned by Caesars Acquisition Co., a publicly traded company created last year through a $1.17 billion rights offering to Caesars shareholders.

As part of the accord, Caesars Growth Partners agreed to spend $223 million to complete renovation of the Quad, formerly known at the Imperial Palace, on the Las Vegas Strip.

Bonds of the operating unit fell today, with Caesars’ $3.31 billion of 10 percent, second-lien notes due 2018 dropping 0.7 cents on the dollar to 47.5 cents in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes were trading above 65 cents a year ago.

Shares Fall

The transaction is a positive one for shareholders of the two publicly traded Caesars entities and negative for creditors of Caesars Entertainment Operating Co., Fitch Ratings said today.

“They further deteriorate certain debtholders’ recovery prospects in an event of default and exacerbate an already weak free cash flow profile,” at the operating company, Fitch said.

Caesars Entertainment dropped 1.4 percent to $25.59 at the close in New York. The stock has more than doubled since the initial public offering in February 2012, when the Las Vegas- based casino company sold shares at $9, about a year after scrapping an earlier IPO plan.

Caesars Acquisition fell 0.9 percent to $13.63. The shares have advanced 23 percent since the November rights offering.

Revenue Miss

Caesars Entertainment also reported preliminary fourth- quarter revenue of $2.05 billion to $2.11 billion. Analysts had estimated sales of $2.13 billion on average, according to data compiled by Bloomberg.

The company probably recorded a net loss of $1.7 billion to $1.82 billion for the period, compared with a loss of $480.3 million a year earlier, according to the statement.

“Performance in many of our regional areas, particularly Atlantic City, was disappointing, however, we’re encouraged by volume and visitation trends in Las Vegas,” CEO Loveman said.

Lazard Ltd. served as financial adviser to the special committee of Caesars Acquisition and Skadden, Arps, Slate, Meagher & Flom LLP served as the committee’s legal counsel.

Centerview Partners LLC and Duff & Phelps served as financial advisers to the special committee of Caesars Entertainment. Reed Smith LLP was legal counsel.

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