Caesars Settles Creditor Lawsuit
Posted on: August 18, 2016, 05:46h.
Last updated on: October 12, 2016, 08:41h.
Caesars has convinced one of its junior creditors to drop litigation and agree to its bankruptcy reorganization plan, a sign that this could be the beginning of the end of the group’s protracted chapter 11 proceedings.
Caesars is attempting to put its main operating unit, Caesars Entertainment Operating Co., through bankruptcy in an attempt to restructure some $18 billion of its debt. But it has been locked in disagreement with its second-lien holders for the past 18 months, many of whom are suing to hold the casino giant to guarantees of CEOC’s debts.
They have also accused Caesars of fraudulently stripping the unit of its most valuable assets for the benefit of Caesars’ controlling creditors, Apollo Global Management and TPG, leaving it with nothing but distressed assets and unpayable debts.
Transfer of Assets
A recent court-appointed examiner’s report, led by ex-Watergate prosecutor Richard Davis, agreed with that assessment. Sometime in 2012, he said, Apollo and TPG began a strategy of weakening CEOC, while strengthening Caesars Entertainment Corp. (CEC) and other subsidiaries in preparation for CEOC’s bankruptcy.
One group of junior creditors, led by Appaloosa Management and Oaktree Capital Group, say they have claims worth $12.6 billion, a sum that has the potential to send CEC into bankruptcy along with its subsidiary, CEOC.
In recent months Caesars has attempted to appease CEOC’s creditors with a more equitable reorganization plan; one that would involve the reunification of many of its prized assets through the merger of CEC and another subsidiary, Caesars Acquisition Company. The merger will create extra cash, new debt, and more equity for the second lien noteholders.
One such noteholder, Frederick Barton Danner, agreed to drop his lawsuit in a New York federal court this week and come on board with the new plan. Under the terms of the settlement, CEOC will pay Barton Danner’s legal fees and offer extra cash to junior creditors who are not currently suing Caesars elsewhere. In return, Barton Danner will support CEOC’s revised reorganization plan.
“We’re optimistic that the settlement will be consummated in conjunction with the successful reorganization of [CEOC],” said Barton Danner’s attorney, Gordon Novod, who added the settlement marks a “new and significant progress in the pursuit of remedies.”
Having initially tried to get away with murder, Caesars is currently engaged in a process of mediation with its other second-tier creditors in an effort to find a solution.
“I believe the parties are making progress towards a consensual resolution of the debtors’ cases and the related litigation against the [Caesars] parties,” wrote mediator Joseph Farnan Jr, this week, although he also noted that more time is needed.