Caesars Entertainment Corp. fell 16 percent to its lowest in more than two years after a judge delivered a victory for creditors that could expose the casino company to claims connected to its bankrupt subsidiary.
Caesars slumped to $7.86, the lowest since February 2013. The company, the largest owner of casinos in the U.S., put its Caesars Entertainment Operating Co. subsidiary in bankruptcy in January. The same creditors are suing the parent company, claiming Caesars improperly transferred assets and stripped away a guarantee that gave lenders recourse to collect from the parent on the unit’s debt.
U.S. District Judge Shira Scheindlin in New York said on May 28 that the trustee representing some of the operating company’s creditors can ask her to rule on parts of its suit without first holding a trial. If she rules in favor of the trustee’s claims, that could eventually expose the parent company to billions of dollars in liabilities and force it into bankruptcy as well.
Caesars said in March the case represents a “material uncertainty” that could imperil its ability to continue as a going concern -- a business with resources to operate indefinitely.
The operating company’s $3.6 billion of 10 percent second-lien notes due December 2018, which may be among the bonds that eventually regain the guarantee from the Caesars parent, rose about 0.5 cent on the dollar to 26.3 cents at 4:50 p.m., according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Separately, New Jersey lawmakers proposed authorizing as many as three new casinos in the northern part of the state, which could be competition for Caesars, the largest operator in Atlantic City.
Stephen Cohen, a spokesman for Caesars at Teneo Holdings LLC, declined to comment on both developments.
“As we have repeatedly argued in court, the parent guarantee was validly terminated in accordance with the terms of the indentures,” Cohen had said in an e-mailed statement May 29.