Caesars Entertainment Bankruptcy in Disarray as Senior Creditors File Against Gaming Operator
Posted on: February 17, 2016, 05:53h.
Last updated on: February 17, 2016, 06:11h.
Caesars Entertainment’s bankruptcy headache intensified into a nightmarish migraine this week, after a group of its top-tier creditors threatened to bail on the company’s debt restructuring plan.
Caesars is seeking chapter 11 bankruptcy for its chief operating unit, CEOC, as it looks to reorganize an industry-high $18 billion debt load.
Meanwhile, the company is being sued by its junior creditors, who allege the restructuring process favors top-tier creditors at their own expense. They also claim that, prior to the bankruptcy proceedings, several of CEOC’s assets were fraudulently transferred to Caesars Entertainment and other subsidiaries for the benefit of its controlling private equity backers.
This, they argue, has left CEOC with distressed assets and an inability to pay its debts, while placing its most valuable assets out of the reach of the junior creditors.
Liquidation a Possibility
The adjudicator in the case, Judge Benjamin Goldgar, is increasingly inclined to side with the junior creditors, and has given Caesars until March 15 to persuade them to come on board or risk losing control of the proceedings entirely.
Caesars’ efforts to block seven million pages of a court-appointed examiners’ investigation into the company’s pre-bankruptcy activities recently aroused the Goldgar’s ire.
“It doesn’t have to end with a confirmed plan,” said Goldgar, of CEOC’s near future. “A trustee could be appointed, the case could be dismissed or, my favorite, the case could be converted to chapter 7 [liquidation], which would just be a hoot, wouldn’t it?”
“The centerpiece of this case was supposed to be the examiner’s report. We’ve all been waiting,” he continued. “This was what was going to blow up the logjam.”
And now, with the case tipping in the favor of the second-tier creditors, it’s the senior noteholders’ turn to rebel.
Senior Creditor Filing
The latter group has now filed a brief which states its dissatisfaction with the new restructuring plan and the faction’s intention to submit a plan of its own.
“If sufficient progress toward a consensual plan is not made … it may very well be that a plan proposed by the first lien bank and noteholders becomes the most efficient means to allow (the company) to emerge in a timely manner from bankruptcy,” reads the new filing.
The document leaves Caesars in an even greater state of disarray, one that could lead to its very permanent undoing.
“Court rulings keep going against Caesars, and if that continues through March 14 the company could be in big trouble,” stock adviser Motley Fool said of the company’s resultant share plunge.
“That’s when a trial alleging the improper transfer of assets in Caesars subsidiaries is set to take place, and if junior bondholders win they could pull the whole company into bankruptcy. That could leave investors with nothing, which is why I wouldn’t go anywhere near this stock,” Motley added.
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