Distressed Investing Gone Wrong

If you liked the book, Barbarians at the Gate, then you’ll enjoy The Ceasars Palace Coup. Max Frumes is one of the co-authors of this work of narrative non-fiction. We learn more about what went wrong when the investors levered Harrah’s with nearly $27 billion in debt when they took the gaming business private. Think you have a handle on bankruptcy? You might change your mind after this one as you learn about the winners and losers in the process.

Interview Highlights

• Comparing The Caesars Palace Coup and Barbarians at the Gate
• LBO funds vs distressed debt investing
• Events and activities leading up to the bankruptcy
• The Gary Loveman story (first CEO job out of academia)
• Loveman figured out a way to leverage data to increase sales
• Balance sheet strong before the Apollo/TPG transaction
• After the leveraged transaction, interest expense exceeded $2 billion annually
• Peace time vs war time leadership
• An explanation of the numerous trauches of debt
• Do bankruptcy attornies get a bad name?

5 Bookclub Questions

Are you reading this book with a group of others? Here are five questions to consider after everyone has read the book:

1. How was it that an outsider could make such a big difference in the gaming industry by introducing a total rewards program which greatly increased sales?
2. Is Mark Rowan a protaganist or antagonist in this story?
3. Did your image of bankruptcy attorneys go up or down after reading this book? Why?
4. Is U.S. capitalism better off with PE and hedge funds like Apollo and TPG Capital? Consider the ramifications of economic value creation in your answer.
5. In the end, who won and who lost?

As you read this book, here are some ideas on structuring your notes:

Name the three acts of the book (e.g. Before, during, and after the bankruptcy)

Name the key players in the book – what were their positives and their shortcomings? Were there any sleepers who became players you liked?

List the 3-5 big ideas from the book – consider breaking down the big ideas by act mentioned above.

Other Interview with the Authors

Want to hear more about the Caesars Palace story or more from the authors? Here are three of our favorites –

1. Caesar’s Coup: Max Frumes and Sujeet Indap on vulture investing with Tobias on The Acquirers Podcast – incidentally, we’re big fans of Tobias Carlisle
2. The Caesars Palace Coup: A Conversation with Max Frumes and Mitch Garber on Vimeo
3. Culinary Union panel: Apollo and TPG’s history in Las Vegas with authors of “Caesars Palace Coup” – there are not many views on this video, but the interview is excellent

If you liked this show with Max Frumes, here are three others to consider –

1. A Virtual Dinner with Guy Spier
2. The Education of a Value Investor
3. The Complete Financial History of Berkshire Hathaway