Caesars Judge to Rule Soon on Hearing Creditor SuitSteven Church
A Delaware Chancery Court judge said he’ll rule soon on whether to hear a lawsuit accusing Caesars Entertainment Corp. of fraud for moving assets away from creditors owed more than $3.6 billion.
The lawsuit, brought by a trustee for second-lien noteholders, alleges Caesars shuffled its most valuable casinos in Las Vegas into a different unit of the company in a bid to keep the properties out of the hands of creditors. Lawyers for Caesars argued during a hearing today in Georgetown, Delaware, that contracts governing the debt require the case to be heard in state court in New York.
“I don’t think the court should do anything to interfere with the New York court’s ability to decide what it wants to do,” said Eric Seiler, an attorney for Caesars.
The lawsuit is one of three pending in New York and Delaware over Caesars’ restructuring actions. Creditors seeking to reverse the asset transfers filed two suits in Delaware. Caesars filed the New York case on Aug. 5 seeking to have the changes ruled legitimate.
Caesars’ lawsuit came a day after the trustee for Wilmington Savings Fund Society, FSB, sued claiming the company and some of its directors designed a restructuring plan that would create a “good Caesars” with lower debt and valuable assets and a “bad Caesars” that may be put into bankruptcy.
The other Delaware case was filed by senior bondholders at the direction of Elliott Management Corp., Bruce Bennett, an attorney for WSFS, said today. In that case, filed in November, bondholders want a judge to appoint a receiver to run the company’s main operating unit. Delaware Chancery Court Judge Sam Glasscock III is hearing both cases.
Both the junior and senior creditors have criticized Caesars’ directors, including David Bonderman, co-founder of buyout firm TPG Capital, and Apollo Global Management LLC’s Marc Rowan.
TPG and Apollo took Caesars private in a $30 billion leveraged buyout in 2008 that loaded the gambling company with more debt than it could handle. Since then, the new owners have stripped Caesars Entertainment Operating Co., or CEOC, of its most valuable assets, including Las Vegas casinos, creditors said in the complaints.
Caesars denied wrongdoing and claimed the transfers were allowed under the debt contracts, known as indentures, according to court papers filed in Delaware. The lawsuits are an attempt by creditors to improve their bargaining position, Caesars said. Credit default swaps held by some of the creditors will pay “handsomely if their threats and baseless claims” force the operating company into default, the company said in the filings.
Caesars’ 10 percent bonds due in 2018 climbed almost 3 percent today to 13.25 cents on the dollar, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
The first Delaware suit is Wilmington Savings Fund Society FSB v. Caesars Entertainment Corp., CA NO. 10004, Delaware Chancery Court (Wilmington). The second Delaware case is UMB Bank v. Caesars Entertainment Corp., CA NO. 10393, Delaware Chancery Court (Wilmington). The New York case is Caesars Entertainment Operating Company Inc. v. Appaloosa Investment Limited Partnership, 652392/2014, New York State Supreme Court (Manhattan).