Caesars Operating Unit Bankruptcy Delays Have Judge in a Thumbs Down Mood
Posted on: January 26, 2016, 01:31h.
Last updated on: January 26, 2016, 01:32h.
The judge in the Caesars operating unit bankruptcy proceedings appears to be losing patience with the casino giant.
US Bankruptcy Court Judge Benjamin Goldgar has warned that Caesars’ main operating unit, CEOC, could be forced into liquidation, an outcome, he implied, that might even afford him a small degree of pleasure.
The source of the good judge’s irritation is the gaming operator’s persistent efforts to block the findings of a court-appointed examiner’s investigation into the company’s pre-bankruptcy activities.
Caesars is currently engaged in a litigious squabble with its junior creditors over its efforts to restructure some $18 billion in debt by putting CEOC through Chapter 11 proceedings. The junior creditors claim the reorganization process favors major creditors at their own expense, and also allege that 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, 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.
Seven Million Pages Blocked
Last week, information surfaced indicating that Caesars is sitting on some seven million pages of the investigation, because it considers them confidential or privileged documents, news that was greeted with measured exasperation by the judge.
“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 complained. “This was what was going to blow up the logjam.”
“You can’t have it both ways,” Goldgar continued. “You can’t have a bankruptcy case depend upon an [examination] and ask that everyone be patient while the examiner does all this work and then, on the theory that the report will then allow everybody to walk away smiling, holding hands … object to the release on the grounds of privilege.”
Beware the Ides of March
Goldgar has given Caesars until March 15 to persuade its junior creditors to accept its new debt reorganization plan, beyond which it will lose control of its bankruptcy proceedings altogether.
March 15th, of course, was known to ancient Romans as the Ides of March, the infamous date of the original Julius Caesar’s assassination, suggesting, perhaps, that the judge has a wicked sense of humor.
For Caesars Entertainment’s operating arm, the date is also deadly serious. Last week, The New York Post quoted sources claiming that the examiner’s investigation sides with the creditors and that it has found “a degree of civil fraud” in the company’s pre-bankruptcy transactions.
If true, this could potentially lead to criminal proceedings against members of the Caesars board, as well as the possibility that the Nevada Gaming Control Board might initiate an investigation of the company’s suitability to hold a gambling license in the state.
Failure for both parties to reach an agreement, then, could lead to “rather a different turn from the one that I imagine the debtor and its parent and its affiliates would like to see,” warned the judge.
Beware, indeed. This judge has definitely not come to praise Caesar.
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