It's Judge Versus Ex-Judge in Battle to End Caesars BankruptcyBy
Bankruptcy negotiator is said unlikely to be replaced soon
Bondholder dispute is last major obstacle to reorganization
Caesars Entertainment Corp. is still negotiating with bondholders over the reorganization of its bankrupt operating unit, even after the mediator overseeing the talks quit, according to two people familiar with the dispute.
The Las Vegas-based casino giant and a committee of second-lien bondholders met last month just an hour after U.S. Bankruptcy Judge A. Benjamin Goldgar said the bondholders should be free to pursue multibillion-dollar lawsuits against Caesars, one of the people said. Neither side is likely to seek a new mediator, said the people, who requested anonymity because the negotiations are meant to be confidential.
The bankruptcy of Caesars Entertainment Operating Co. has been winding its way through Goldgar’s Chicago courtroom since January 2015. The last major step is resolving a fight over how much the non-bankrupt parent and its majority owners, Apollo Global Management LLC and TPG Capital, should pay to end the bondholder suits.
Joseph Farnan, a former federal judge, was chosen to mediate the dispute. His role was to help the two sides overcome their differences, although any suggestions he may have made weren’t binding.
But he quit Friday, saying he was under too much pressure to disclose information about the discussions. After Farnan filed a progress report, Goldgar repeatedly pressed for details about the mediation as he weighed whether to lift a bar on the bondholder suits.
“Apparently the court did not find my progress report helpful because I didn’t breach the confidentiality of the mediation and testify in open court or describe the discussions and proposals exchanged,” Farnan wrote in his letter of resignation. “Either the court misspoke, or doesn’t understand how such disclosures would be viewed by participants and the markets.”
Last month, Goldgar said the two sides were probably about $1.2 billion apart and complained that Apollo and TPG were seeking to use bankruptcy to get a “free ride” past potential damages in the lawsuits.
Although Goldgar lifted the freeze on the bondholder litigation, the lawsuits remain on hold until next month while Caesars appeals his decision. Caesars has said it would probably join its operating unit in bankruptcy if the bondholders win the lawsuits, which are pending in New York and Delaware.
Shares of Caesars Entertainment Corp. dropped 44 cents, or 6.6 percent, to $6.24 at 3:02 p.m. in New York trading.
The bankruptcy is In re Caesars Entertainment Operating Co. Inc., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).