US judge halts NY litigation vs. Caesars Entertainment

WILMINGTON, Del. — A bondholder lawsuit against Caesars Entertainment Corp., which the casino company has warned could plunge it into bankruptcy alongside its operating unit, was stayed Friday by a U.S. Bankruptcy judge.

Judge Benjamin Goldgar said the stay on the litigation would be lifted either on May 9 or 60 days after an examiner publishes his report into corporate deals that the bondholders allege stripped the operating unit of its best assets.

The operating unit filed for bankruptcy in Goldgar's court last year. The judge ordered an examiner, Richard Davis, to investigate those allegations and Davis has said his report will be released by the middle of March.

Caesars has said it expects to prevail in the lawsuit in federal court in Manhattan, but it wanted to remove the threat it could be found to be liable for billions of dollars to holders of bonds issued by its operating unit.

The bondholders sued in New York because they believe the parent company guaranteed the bonds, which were issued by the now-bankrupt Caesars Entertainment Operating Co. Inc.

Goldgar did not rule on a request to stay similar litigation in Delaware's Court of Chancery. He scheduled a hearing on May 4 to discuss the stay of that litigation.

Caesars has said the lawsuits threaten its proposal to settle the bankruptcy by paying more than $1 billion to resolve allegations it stripped away choice assets such as The Linq Hotel on the Strip in Las Vegas from the operating unit.

Davis has been investigating the allegations for nearly a year. His report could break the deadlock in the $18 billion bankruptcy of the operating unit, which has pitted the parent company's private equity owners against bondholders led by fund manager Appaloosa Management.

Caesars was created from the $31 billion leveraged buyout of Harrah's Entertainment in 2006, a deal led by TPG Capital Management and Apollo Global Management, which continue to control Caesars.

Shares of Caesars gained 85 cents, or 10.37 percent, to close at $9.05.