Caesars Seeks to Avoid Deciding Start Date of BankruptcyBill Rochelle
Caesars Entertainment Operating Co. asked a Chicago judge to “suspend” an involuntary bankruptcy petition filed by junior creditors in Delaware, which would bury the issue of whether the casino company’s reorganization began Jan. 12 or three days later.
Those three days make a big difference in determining how hard it will be for the junior creditors to set aside liens given to senior lenders on so-called cage cash just under three months before the earlier filing.
The second-lien bondholders filed their involuntary Chapter 11 petition in Wilmington, Delaware, on Jan. 12. The company filed a voluntary petition for itself and scores of affiliates Jan. 15 in Chicago. Last week, U.S. Bankruptcy Judge Kevin Gross in Wilmington sent the involuntary case to Chicago to proceed in tandem with the voluntary reorganization.
Gross, however, avoided picking a start date for the bankruptcy. Monday, Caesars asked U.S. Bankruptcy Judge A. Benjamin Goldgar in Chicago to “suspend” the involuntary case, issuing no decision on a date. Caesars scheduled a Feb. 11 hearing for the judge to decide whether to suspend the case.
Caesars disputes the validity of the second-lien bondholders’ petition. The casinos said that they were generally paying their debts and that the bondholders filed the petition in bad faith. Caesars even said the bondholders should be sanctioned for filing the involuntary case improperly.
The Las Vegas-based company said pre-bankruptcy transactions will be thoroughly investigated in due course by the official creditors’ committee and “potentially” by an examiner, so there’s no need to incur the cost of litigating over a start date.
In sending the case to Chicago, Gross said the pre-bankruptcy conduct by Caesars that the junior bondholders have attacked was “suspect” on its face. He pointed to a decision last month in which a federal district judge in New York said Caesars’ transfer of assets and revocation of guarantees could amount to a violation of the Trust Indenture Act.
Caesars Entertainment Corp., the non-bankrupt parent, has said it doesn’t oppose having an examiner look into pre-bankruptcy dealmaking.
The transactions before bankruptcy were part of agreements Caesars Operating negotiated with senior lenders outlining a plan to fully pay bank lenders with $4.35 billion in debt and pay first-lien lenders owed $6.35 billion a 92 percent recovery.
Junior noteholders said the plan is worth 10 percent to 12 percent for lower-ranked creditors, including holders of $5.24 billion in second-lien bonds and about $1 billion in unsecured bonds.
The voluntary filing in Chicago is In re Caesars Entertainment Operating Co. Inc., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The involuntary case in Chicago is In re Caesars Entertainment Operating Co. Inc., 15-03193, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).