Property Transaction between CEOC and CGP LLC and Related Financing

Property Transaction between CEOC and CGP LLC

In May 2014, CEOC sold to CGP LLC (hereafter collectively referred to as the "CEOC-CGP LLC Property Transaction"):


(i)	its subsidiaries that own the assets comprising The Cromwell, The LINQ Hotel, Bally’s Las Vegas, and Harrah's New Orleans (collectively the "Properties");


(ii)	50% of the ongoing management fees and any termination fees payable under property management agreements to be entered between a CEOC subsidiary and the owners of each of the Properties; and


(iii)	certain intellectual property that is specific to each of the Properties.

In May 2014, CEOC completed the CEOC-CGP LLC Property Transaction for an aggregate purchase price of $2,000.0 million, minus assumed debt and other customary closing adjustments. The debt assumed consisted of the $185.0 million Cromwell Credit Facility described in Note 9, "Debt." Consistent with the 2013 sale of Planet Hollywood Las Vegas from CEOC to CGP LLC, this transaction was accounted for as a reorganization of entities under common control, with CEOC results being reflective of the sold properties through the date of the sale. CGP LLC results are reflective of CGP LLC as consolidated into CEC results; accordingly the results of the four properties that CGP LLC acquired from CEOC are included in CGP LLC only after the date of acquisition.

Under the terms of the agreements governing the CEOC-CGP LLC Property Transaction, each property is managed by CEOC. In addition, each property licenses enterprise-wide intellectual property from Caesars Licensing Company, LLC ("CLC"). Upon implementation of the services joint venture described in Note 18, "Caesars Enterprise Services," CEOC assigned the management agreements to CES, and CLC granted to CES licenses with respect to the enterprise-wide intellectual property. CEOC receives ongoing management fees during the term of the related property management agreement consisting of a (i) base management fee of 2% of monthly net operating revenues and (ii) an incentive management fee in an amount equal to 5% of EBITDA for each operating year.

In addition to the above, the agreements governing the CEOC-CGP LLC Property Transaction also provide that CEC and CEOC will indemnify CGP LLC for certain obligations, including:


(i)	the failure of CEC and CEOC to perform or fulfill any of their covenants or breach any of their representations and warranties under the agreements;


(ii)	new construction and renovation of The LINQ Hotel of up to 15% of amounts in excess of $223.1 million; and


(iii)	certain other agreed upon matters.

Related Financing Agreement

As disclosed in greater detail in Note 9, "Debt," in April 2014, CGP LLC entered into a First Lien Credit Agreement providing for a $1,175.0 million term loan and a $150.0 million revolving facility, and completed the offering of $675.0 million aggregate principal amount of their 9.375% second-priority senior secured notes due May 2022.