Caesars Private Equity Backers Must Show their Bank Statements, Rules Bankruptcy Judge

Posted on: September 18, 2016, 10:13h. 

Last updated on: October 12, 2016, 03:24h.

Caesars director Marc Rowan to disclose financial details
Marc Rowan, billionaire co-founder of private equity Apollo Global Management may have to turn over his financial details to the court, as Caesars junior bondholders push for greater compensation. (Image: Jonathan Alcorn/Bloomberg)

Caesars’ junior creditors have successfully forced the casino group’s controlling private equity backers to reveal details of their wealth. The request was granted on Wednesday by the judge presiding over the $18 billion dollar bankruptcy of Caesars’ main operating unit, Caesars Operating Entertainment Corp (CEOC).

“These folks are going to have to pony up the paper,” declared Judge Benjamin Goldgar at a hearing in Chicago.

Caesars is seeking to reorganize CEOC’s $18 billion debt load down to around $10 billion. But it has been locked in disagreement with its junior bondholders for almost two years, many of whom are suing to hold the casino giant to guarantees of CEOC’s debts.

Asset Stripping

They have also accused Caesars of stripping the unit of its most valuable assets for the benefit of its controlling creditors, Apollo Global Management and TPG, leaving it with nothing but distressed assets and unpayable debts. Apollo and TPG’s $30.1 billion leveraged takeover of the company, just before the recession bit hard into the casino industry and left it with an industry-high debt.

A court-appointed examiner’s report, spearheaded by Watergate prosecutor Richard Davis, concluded that CEOC was indeed picked clean of its prize properties. The report claimed that, in 2012, Apollo and TPG began a strategy to weaken CEOC and strengthen their own hand in the preparation for potential bankruptcy proceedings.

Parent Caesars Entertainment Corp (CEC) has pledged $4 billion towards CEOC’s reorganization plan, $3.5 billion more than it originally offered to contribute, but for the junior bondholders, it isn’t enough. They want individual directors to be held financially responsible for the mess.

Dirty Laundry

Billionaires Marc Rowan and David Bonderman, founders of Apollo and TPG, respectively, are two CEC directors who must reveal their financial details to the court in exchange for release from allegations of fraud.

“We disagree with the judge’s decision, which permits an unwarranted invasion into personal privacy and is contrary to well-established law,” Marc Kasowitz, a lawyer for TPG, told the Las Vegas Review-Journal via email.

Earlier this week, the mediator appointed by Caesars to help negotiate with the junior creditors, former federal judge Joseph J. Farnan Jr, resigned in protest at Goldgar’s demand for him to reveal more details of the talks, details that are traditionally understood to be confidential.   

Goldgar last month decided not to renew the legal shield protecting CEOC from its creditors’ lawsuits, litigation threatens to plunge the whole company into bankruptcy.