\nBill Rochelle, Bloomberg \u00b7<\/p>\n
\tA judge dealt Caesars Entertainment Corp. (CZR)\u2019s bankruptcy reorganization a possible fatal blow in ruling that the company violated federal law when it shuffled assets and refinanced debt as part of an alleged scheme to protect itself from lower-ranking creditors.<\/p>\n
\tThe ruling came in a related lawsuit in Manhattan on the same day that the casino company sought bankruptcy protection last week in Chicago for its Caesars Entertainment Operating Co. unit. U.S. District Judge Shira Scheindlin rebuffed an attempt by the unit to dismiss the suit, which had been filed by noteholders. Scheindlin said their allegations about the transfer of valuable properties away from the unit in August \u2014 and the parent\u2019s removal of guarantees for creditors \u2014 amount to a violation of the federal Trust Indenture Act of 1939.<\/p>\n
\tThe judge found that the company\u2019s alleged elimination of the guarantees was \u201can impermissible out-of-court restructuring\u201d that is \u201cexactly\u201d what a provision of the 1939 law \u201cis designed to prevent,\u201d according to her ruling.<\/p>\n
\tAugust Transactions<\/p>\n
\tThe August transactions underpin the proposed bankruptcy reorganization laid out in agreements in which first-lien noteholders would receive a 92 percent recovery while junior noteholders could take home no more than $549 million for their $5.24 billion in second-lien notes.<\/p>\n
\tJonathan Hurwitz, a lawyer for Caesars Entertainment Corp., didn\u2019t immediately respond to phone and e-mail messages on a holiday weekend seeking comment on Scheindlin\u2019s ruling.<\/p>\n
\tThe operating unit filed its Chapter 11 petition on Jan. 15, three days after second-lien noteholders filed an involuntary bankruptcy petition in Delaware against Caesars Entertainment Operating Co., the largest of the Caesars operating companies.<\/p>\n
\tThose filings followed months of negotiation and litigation over how best to reduce the billions of dollars of debt assumed in a 2008 buyout that was arranged by Leon Black\u2019s Apollo Global Management and David Bonderman\u2019s TPG Capital Management. The dissident creditors have accused Apollo and TPG of trying to create a \u201cgood Caesars\u201d to hold the valuable properties and a \u201cbad Caesars\u201d to owe most of the debt.<\/p>\n
\tTwo Bankruptcies<\/p>\n
\tExcept for non-controversial permissions to operate the casinos as usual, the two bankruptcies are effectively frozen until the Delaware judge decides which of the two courts will preside over the reorganization effort.<\/p>\n
\tWhile the judge put her ruling on hold for Caesars Entertainment Operating Co., as is required during bankruptcy proceedings, Scheindlin said she was free to issue her opinion regarding the non-bankrupt parent company.<\/p>\n
\tThe holders of notes issued in 2005 and 2006 sued in September, seeking to set aside transactions the month before in which Caesars\u2019 main operating unit transferred assets to related entities the noteholders couldn\u2019t reach, and the parent canceled its guarantee of the debt.<\/p>\n
\tThe noteholders alleged that Section 316 of the Trust Indenture Act barred the unit from altering its obligation to pay the bonds without 100 percent consent from holders.<\/p>\n
\tScheindlin described the complaint as alleging that Caesars\u2019 \u201cultimate plan\u201d was to put the main unit \u201cinto bankruptcy while protecting Apollo Management LP and TPG Inc. from CEOC\u2019s creditors.\u201d<\/p>\n
\tValid Lawsuit<\/p>\n
\tThe company contended in its bid for dismissal that the noteholders didn\u2019t have a valid lawsuit even if the facts in the complaint were true. The noteholders couldn\u2019t sue because there has been no payment default as yet, the companies said. Scheindlin rejected the company\u2019s arguments, including its claim that individual bondholders are barred from suing.<\/p>\n
\tThe judge relied on a previous case which says that transferring away assets and eliminating guarantees to backstop the debt, even though there\u2019s been no payment default, is a violation of the Trust Indenture Act because it \u201cconstitutes an impairment of the right to sue for payment.\u201d<\/p>\n
\tScheindlin was deciding two lawsuits. She allowed one to stand in its entirety. She ruled that the other was flawed because the noteholders hadn\u2019t sufficiently alleged that Caesars controlled how some other noteholders had voted in favor of the August transactions. She gave that plaintiff until Jan. 29 to file a revised complaint.<\/p>\n
\tThe case is MeehanCombs Global Credit Opportunities Funds LP v. Caesars Entertainment Corp., 14-cv-7091, U.S. District Court, Southern District New York (Manhattan).<\/p>\n
\tThe voluntary bankruptcy in Chicago is In re Caesars Entertainment Operating Co. Inc., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago).<\/p>\n
\tThe involuntary bankruptcy in Delaware is In re Caesars Entertainment Operating Co. Inc., 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":"
Bill Rochelle, Bloomberg \u00b7 A judge dealt Caesars Entertainment Corp. (CZR)\u2019s bankruptcy reorganization a possible fatal blow in ruling that the company violated federal law when it shuffled assets and refinanced debt as part of an alleged scheme to protect…<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"class_list":["post-8551","post","type-post","status-publish","format-standard","hentry","category-latest-casino-news"],"_links":{"self":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/8551","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/comments?post=8551"}],"version-history":[{"count":0,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/posts\/8551\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/media?parent=8551"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/categories?post=8551"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumarchives.tmsites.net\/index.php\/wp-json\/wp\/v2\/tags?post=8551"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}