In a case full of twists, Las Vegas-based Caesars Entertainment Corp. late Monday won a two-week extension on a shield from lawsuits worth billions of dollars just days after a different U.S. court allowed those cases to proceed.
Investors are suing Caesars for reneging on its guaranty of bonds issued by its operating unit, Caesars Entertainment Operating Co. Inc., or CEOC, which is in bankruptcy court.
Those lawsuits will now be stayed until Sept. 16, according to a filing in U.S. District Court in Chicago.
A hearing is scheduled for Tuesday in Chicago, just hours before U.S. District Judge Jed Rakoff in Manhattan is scheduled to hear oral arguments from several bondholders.
Shares of the gaming company closed down $1.18, about 16 percent, at $6.35 on Monday on concerns of an imminent ruling on lawsuits in New York, which the company has warned could plunge it into bankruptcy alongside its operating unit. They then rebounded in after-hours trading.
Caesars faces $7.7 billion in claims in New York from the bondholder lawsuits and $3.7 billion in Delaware.
Jim Millstein, a financial adviser to the bankrupt operating unit, testified in June that billions of dollars in damages from the bondholder cases could push the parent into bankruptcy, creating one of the “biggest corporate messes of our time.”
CEOC had argued that a halt to lawsuits against its nonbankrupt parent was critical to protecting a multibillion-dollar contribution to its reorganization plan. The Caesars parent has talked of contributing $4 billion to the reorganization.
The operating unit filed for bankruptcy in January 2015 with $18 billion in debt. The goal of the bankruptcy was to shave some $10 billion of indebtedness.
Until now, Caesars’ operating unit was able to use a bankruptcy court shield to protect its parent from the $11 billion in bondholder lawsuits.
That shield was scheduled to expire on Monday after U.S. Bankruptcy Judge Benjamin Goldgar in Chicago refused last week to grant a third stay on the lawsuits.
The bankruptcy has embroiled some of the largest funds on Wall Street, pitting Caesars’ controlling investors, Apollo Global Management and TPG Capital Management, against bondholders, led by hedge fund Appaloosa Management.
Appaloosa has accused Caesars of stripping its operating unit of its best assets prior to the 2015 bankruptcy filing, allegations that were backed by an independent examiner’s report in March. Those assets included The Linq Hotel and Planet Hollywood on the Strip.
Caesars has repeatedly denied the allegations.
Goldgar at one point suggested that Apollo and TPG also contribute money to the bankruptcy reorganization.
Caesars accumulated most its debt in 2008 when it was acquired by TPG and Apollo in a $29 billion leveraged buyout.
Since the original filing, company officials have maintained that the bankruptcy filing and financial restructuring would not affect day-to-day operations of its hotels and casinos. They also said Caesars’ 45 million-member Total Rewards customer loyalty program would not be affected.