Gambling operator Caesars Entertainment Corp. has settled earlier this week one of the bondholder lawsuits brought against it, thus bringing its main operating unit – Caesars Entertainment Operating Company (CEOC), one step closer to concluding a highly controversial bankruptcy case.
The settlement was disclosed by the gambling company in a Securities and Exchange Commission filing on Wednesday. It comes as a resolution to a class-action lawsuit brought by Frederick Barton Danner as a lead plaintiff. Mr. Danner together with other unsecured holders of bond debt issued by Caesars’ main operating unit aimed at holding the major casino company to guarantees of CEOC’s debt.
Reached on Monday, the settlement will see the lead plaintiff drop the legal action and support the operating unit’s Chapter 11 restructuring efforts. CEOC filed for Chapter 11 bankruptcy protection in January 2015. Since then, the company has been facing numerous challenges, including multiple legal proceeds against it and its parent company, that have been preventing it from recovering from its difficult situation.
If unsecured bondholders in the settled legal action vote in favor of CEOC’s restructuring, they will receive extra cash of 6.38 cents per dollar in their bond debt. In exchange, Caesars’ main operating unit has agreed to modify its restructuring plan in a manner consistent with the latest developments in its bankruptcy case and to add Mr. Danner as a “Released Party” within the said plan.
Commenting on the Wednesday announcement, Mr. Danner’s lawyer, Gordon Novod, said that the settlement represents a significant progress in the process of remedying affected bondholders. Mr. Novod also expressed optimism that the case being settled will later on contribute to CEOC’s successful restructuring.
Mr. Danner’s case was brought to court in October 2014, or several months before Caesars’ main operating unit filed for Chapter 11 bankruptcy protection. The class-action suit argued that a financial transaction that occurred in August 2014 was designed with the intention to release the parent company of a $750-million unsecured debt guarantee, with the debt being due 2016. According to Mr. Danner and his fellow bondholders, the transaction took place without their explicit consent and had thus breached the Trust Indenture Act.
Responding to the legal claim, Caesars said back then that the said deal as well as other such transactions targeted by separate other suits were aimed at helping its main operating unit.
