\nJunior creditors of Caesars Entertainment Corp. (CZR) moved to force the main operating unit of into bankruptcy in an attempt to block a plan to protect senior lenders at their expense, after contentious wrangling over the casino company\u2019s future.<\/p>\n
\tThe involuntary Chapter 11 filing today by Appaloosa Investment LP and other junior lenders in Delaware pre-empts Caesars\u2019 own effort to put the unit under bankruptcy court protection and threatens to scuttle a deal between the company and senior creditors. Appaloosa asked the court to appoint an examiner to investigate claims that insiders \u201cplundered\u201d the unit, paying themselves hundreds of millions of dollars while moving assets out of the junior creditors\u2019 reach.<\/p>\n
\t\u201cThese insider transactions stripped the debtor of most of its valuable income-generating assets and hundreds of millions of dollars of cash, leaving the debtor burdened with massive debt that cannot be repaid,\u201d Appaloosa and the other junior creditors said in court papers today.<\/p>\n
\tThe filing by Appaloosa and other holders of second-priority senior secured notes in the unit follows months of negotiation and litigation between Las Vegas-bases Caesars and its creditors.<\/p>\n
\tCaesars, bought by Apollo Global Management LLC (APO) and TPG Capital in 2008, has been working on a plan that would put its biggest unit into Chapter 11 bankruptcy protection voluntarily as soon as this week and turn it into a real estate investment trust.<\/p>\n
\tCompany Plan<\/p>\n
\tThat plan requires Caesars Entertainment Operating Co., the most indebted subsidiary, with $18.4 billion of borrowings, to exit bankruptcy court as a reorganized set of companies by February 2016, according to a regulatory filing last month.<\/p>\n
\tCaesars said last week that it expected to have support for a restructuring deal from investors holding two-thirds of its senior bonds. That threshold would make it eligible to seek court approval of a reorganization plan. Even with such support, however, other creditors still have the right to challenge any reorganization.<\/p>\n
\t\u2018Transparent Attempt\u2019<\/p>\n
\t\u201cThe claims are a transparent attempt to thwart a restructuring that has been agreed to by more than two-thirds of CEOC\u2019s first-lien noteholders,\u201d Caesars said in a statement in response to Appaloosa\u2019s court filings. \u201cThe action is designed to injure CEOC while these junior creditors attempt to boost their standing.\u201d<\/p>\n
\tThe company said the involuntary bankruptcy petition would not affect Caesars\u2019 operations.<\/p>\n
\tUnder Chapter 11 of the U.S. Bankruptcy Code, creditors can force a company into bankruptcy by claiming it\u2019s generally not paying its debts. The company can either dispute the claims and seek to have the involuntary petition thrown out, or move to convert the case into a voluntary bankruptcy and reassert its control over the reorganization.<\/p>\n
\tA company initially retains control of its operations in the days following an involuntary bankruptcy while creditors and company officials fight in court over what should happen next.<\/p>\n
\tLast year, creditors sued Caesars, with some accusing it of shifting the most valuable assets out of the operating company to other units.<\/p>\n
\tIn 2011 the operating unit moved its online gambling business, worth about $780 million, to another Caesars\u2019 entity. Last year, the operating company transferred ownership of two Las Vegas properties, a hotel and a dining, shopping and entertainment corridor. Creditors said the unit didn\u2019t get enough in return for the assets.<\/p>\n
\t\u2018Good Caesars\u2019<\/p>\n
\tThe goal was to create a \u201cgood Caesars\u201d with lower debt and profitable assets and a \u201cbad Caesars\u201d with higher debt and less valuable assets, according to one lawsuit, filed by a trustee for second-lien creditors. Should \u201cbad Caesars\u201d fail, \u201cgood Caesars\u201d would be protected, the creditors said.<\/p>\n
\tIn December, the company skipped a $225 million interest payment on the second-lien notes, days before announcing its restructuring plan. Appaloosa and other holders of those notes moved to put the brakes on that plan with today\u2019s filing.<\/p>\n
\tUnder the company\u2019s proposed Chapter 11 plan, second-lien noteholders would never receive the interest payment, Appaloosa said in the filing.<\/p>\n
\t\u201cInstead, the plan would treat holders of second lien notes as fully unsecured, and provide them with equity that even the debtor values at a small fraction of the outstanding principal,\u201d according to the filing.<\/p>\n
\tThe creditors asked the court to appoint an examiner \u201cto investigate and report on a series of pre-petition insider transactions by which the parent of Caesars Operating Co. Inc. systematically stripped the debtor of many billions of dollars of assets and cash in the 15 months prior to bankruptcy.\u201d<\/p>\n
\tThe case is In re Caesars Entertainment Operating Co., 15-10047, U.S. Bankruptcy Court, District of Delaware (Wilmington).<\/p>\n
No replies were posted for this topic.<\/p>\n","protected":false},"excerpt":{"rendered":"
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