Caesars Entertainment Corp. (CEC) may face up to $5.1 billion in damages related to a number of corporate deals that resulted in its main operating unit filing for Chapter 11 bankruptcy protection. That was what an independent examiner said on Tuesday upon publishing the results from a year-long investigation of the $18-billion debt case involving one of the world’s biggest gambling operators.
Former Watergate investigator Richard Davis and a team of lawyers were appointed last year to examine more than 8 million pages of documents and interview 92 people in relation to Caesars Entertainment Operating Company’s (CEOC) bankruptcy filing.
Following a more than a year-long probe, Mr. Davis and his peers found out that Caesars, which is owned by Apollo Global Management and TPG Capital, disposed of prime properties, thus leaving the company incapable to pay a huge debt.
The investigation was initiated last year, after a group of junior creditors, led by Appaloosa Management, claimed that CEOC, known to be Caesars’ main operating unit, had been stripped clean of some of its best properties and this had benefited the gambling company and its owners.
Mr. Davis said in his 80-page summary of the case that the major operator may face between $3.6 billion and $5.1 billion in damages for claims for the fraudulent disposal of assets and violation of fiduciary duties against officials of both CEOC and CEC. It seems that there were claims for fiduciary violations against Apollo and TPG as well.
The independent investigator also found out that late in 2012, Apollo and TPG introduced a strategy aimed at strengthening their position in the case of CEC and/or CEOC bankruptcy. Mr. Davis revealed that he had evidence that CEOC has been insolvent since 2008. In that case, managers would have had to act on creditors and shareholders’ behalf in order to address the matter in due manner.
Commenting on the examiner’s findings, CEOC said that it will now focus its attention towards its emergence and that it is to file an updated reorganization plan any time soon. In addition, the company will ask the court to schedule a disclosure statement as well as confirmation hearings.
In a separate statement, CEC claimed that the transactions that took place over the past several years were aimed at benefiting CEOC and its creditors, thus disagreeing with Mr. Davis’ conclusions. Apollo also argued that it had acted in a good faith and with the intention to help “CEOC strengthen its capital structure.”
