Caesars Entertainment Corp. May Face Bankruptcy after Unfavorable Ruling

Gambling operator Caesars Entertainment Corp. may eventually join its main operating company in bankruptcy, after Judge Benjamin Goldgar of the U.S. Bankruptcy Court issued an unfavorable ruling on Wednesday.

Judge Goldgar ruled against Caesars Entertainment’s request to stop as many as four lawsuits filed by hedge fund creditors. The casino company’s main operating unit owes those creditors billions of dollars.

On January 15, 2015, Caesars Entertainment Operating Co. filed for Chapter 11 bankruptcy protection. The hedge funds claimed that Caesars Entertainment had guaranteed the debts. The company, in turn, contended that the lawsuits filed against it were without any merit.

The gambling operator together with TPG Capital and Apollo Global Management LLC, its private-equity backers, pointed out that stopping the cases was crucial to their attempt to overhaul the operating unit’s debt, which amounts to $18 billion.

As mentioned above, Caesars Entertainment Operating Co. was put into bankruptcy earlier this year. This resulted in a series of lawsuits against its parent company not only in Chicago, but also in New York and Delaware.

If the rulings on the pending lawsuits are not in favor of Caesars Entertainment, the company is threatened to join its unit in bankruptcy. The operator attempted, although unsuccessfully, to avoid this fate and receive the same protection from legal proceedings as its subsidiary.

Hedge fund creditors, with Oaktree Capital Management, Appaloosa Management, and Centerbridge Partners being among them, contended that the lawsuits are critical as they would determine if the operating unit had had its debts guaranteed by Caesars. They also argued that quality assets such as Las Vegas-based Linq Hotel & Casino had been moved into affiliates in order to benefit TPG and Apollo.

Caesars Entertainment, in turn, pointed out that its operating unit had received due compensation for the transfer of the assets in question and that the deals had been reviewed by an independent examiner.

Caesars Entertainment Operating Co. is expected to emerge from its Chapter 11 protection as a separate gambling operator. Caesars Entertainment has previously announced that it was planning to pay about $1.5 billion in order to support the restructuring of the operating unit.

The restructuring has been supported by first-lien noteholders. A few days ago, second-lien noteholders also gave their nod to the plan and this resulted in Caesars Entertainment’s shares going up more than 20%.

However, Judge Goldgar’s decision led to the operator’s stock plummeting more than 40% on Wednesday.

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