caesars entertainmentCasino operator Caesars Entertainment Corp was granted a brief reprieve after a federal judge postponed a scheduled hearing in a bondholder lawsuit until October 5 based on a last-minute federal ruling that allowed the company to keep its bondholders at bay for another month or so.

U.S. Bankruptcy Judge A. Benjamin Goldgar in Chicago had earlier declared that that the company had to face lawsuits filed by bondholders worth $11.4 billion. This would have allowed the stalled bondholders lawsuits to proceed. The bondholders are said to have strong chance of winning, which Caesars has warned could push the company into bankruptcy.

Caesars subsidiary, the Caesars Entertainment Operating Co Inc (CEOC) filed for Chapter 11 bankruptcy protection in January 2015 with $18 billion in debt. The bondholders have accused the parent company Caesars of removing key assets from CEOC like the Linq Hotel & Casino in Las Vegas which has weakened the subsidiary’s financial position.

These lawsuits are however the single biggest hurdle in getting CEOC out of bankruptcy. Caesars has said that the lawsuits are threatening its plan to give CEOC $4 billion to help re-organize its structure and exit bankruptcy proceedings.

The bondholders want to use the lawsuits filed in New York and Delaware to get a better recovery percentage on their debts, which is currently at 34 percent. The bondholders want the Caesars as the parent company to be liable for CEOC’s debt and Judge Goldgar had finally agreed that it was okay for Caesars to be held accountable.

Caesars’ bankruptcy lawyers had initially asked Golgar to hold off the lawsuits until a U.S. district judge could review his decision, but Golgar refused. This promoted Caesars to move for an emergency order from a higher court namely a federal judge to stay Golgar’s ruling.

However U.S. District Judge Robert W. Gettleman has decided to keep bondholders at bay till October 5 when the judge will review the case and decide if he needs to overrule Judge Goldgar’s decision. Judge Gettleman has cautioned Caesars that they face an uphill battle and the chances of the decision being overturned is slim.

Caesars is controlled by private equity firms TPG Capital Management and Apollo Global Management. The bondholders have complained that the owners have not made enough effort to settle their claims. Share prices of Caesars fell by 15 percent to $6.37 after dropping initially by 28 percent after news of the ruling broke.

Categories: Casino News

Posted on: 31st August 2016 by: Gary Beachley