Caesars Wins New Chance to Stop Suits That Threaten Parentby
Creditors fight bankrupt casino over lost payment guarantees
Courts had let cases proceed while company reorganized
Caesars Entertainment Operating Co. won another chance to halt a series of New York lawsuits that threaten to put the casino company’s parent into bankruptcy.
An appeals court in Chicago ruled that two lower-court judges used faulty reasoning to deny Caesars’ request to temporarily halt the lawsuits. The appeals court sent the issue back to the bankruptcy judge to reconsider his decision to let the New York cases proceed.
Creditors sued parent Caesars Entertainment Corp., claiming it violated federal law when, without unanimous bondholder approval, it abandoned a pledge to help the operating unit repay $7 billion in debts. The operating unit filed for bankruptcy about five months later. Should Caesars lose the suits, which are all before the same New York judge, it could be forced into bankruptcy, too.
The operating unit asked the Chicago judge overseeing its bankruptcy to halt the lawsuits, arguing a suspension was justified because the threat to the parent would also hurt the chances that the operating unit could reorganize. Normally, only a bankrupt company is entitled to such protection, not non-bankrupt affiliates.
The appeals court sent the case back to the lower court, saying U.S. Bankruptcy Judge A. Benjamin Goldgar should first determine whether the lawsuits could have a negative impact on the bankruptcy.
Stephen Cohen, a spokesman for Las Vegas-based Caesars, and Bruce Bennett, a lawyer for a committee of creditors that opposed halting the lawsuits, didn’t immediately respond to e-mails requesting comment on the ruling.
The appeal is Caesars Entertainment Operating Co. v. BOKF NA, 15-3259, U.S. Court of Appeals for the Seventh Circuit (Chicago). The bankruptcy is In re Caesars Entertainment Operating Co., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).