Another surprising turn of events will add another tangle to the already complex $18-billion bankruptcy case, involving casino operator Caesars Entertainment Operating Co. Inc. (CEOC), known to be the main operating unit of industry giant Caesars Entertainment corporation.
It was announced in a Friday letter to the US Bankruptcy Court of Chicago that retired US Judge Joseph Farnan, who was appointed as a mediator of the multi-billion-dollar case in March, has decided to resign. It is still unknown whether a replacement would be appointed and who would take that role.
CEOC filed for Chapter 11 bankruptcy protection in January 2015. Since then, the matter has evolved into an $18-billion bankruptcy case that also includes Caesars, its private equity backers Apollo Global Management LLC and TPG Capital, lenders, and bondholders. The conflict actually stemmed from CEOC’s accusations that its parent company had stripped it of a number of key assets without the necessary approval of creditors.
Over the past year and a half, involved constituencies have been trying to bring themselves on the same page in regards to the reorganization of the pending $18-billion debt. Caesars managed to agree with senior lenders and bondholders to slash the debt by more than a half. However, junior creditors did not back the move. That is when Mr. Farnan was appointed as mediator to get all parties on board .
He said in his resignation letter that he has truly enjoyed working on the case. Mr. Farnan cited recent events and “atypical views” on the mediation process as the main reasons for his decision to resign. US Bankruptcy Judge Benjamin Goldgar, who is overseeing the CEOC bankruptcy case, has recently said that the latest progress report provided by the mediator was incomplete and lacked in details about discussions between the involved parties and the proposals made during that discussions.
According to Mr. Fanrnan, such details could affect the case, all participants, and the markets in quite a negative manner and this is why there is no need for them to be disclosed.
CEOC is due to present its reorganization plan in January 2017. However, there are certain legal hurdles that need to be overcome first. Late in August, Judge Goldgar did not renew the legal shield that protected the casino company from litigation. As a result, it may have to pay up to $11 billion in debt guarantees in two separate lawsuits. CEOC appealed the decision and litigation cannot begin before October in Delaware and New York courts. Litigation was originally scheduled to begin in August in New York and early in September in Delaware.
