U.S. judge halts remaining litigation against Caesars
A U.S. judge on Wednesday halted a lawsuit against Caesars Entertainment Corp., saying it could derail last week’s $5 billion agreement that was aimed at extracting the casino company from a costly bankruptcy.
October 5, 2016 - 1:12 pm
CHICAGO — A U.S. judge on Wednesday halted a lawsuit against Caesars Entertainment Corp., saying it could derail last week’s $5 billion agreement that was aimed at extracting the casino company from a costly bankruptcy.
While a vast majority of Caesars creditors agreed to drop some $13 billion in legal claims against the casino group last week, a hedge fund with a $9.4 million claim refused to back the deal and sought to pursue its lawsuit.
Trilogy Capital Management is one of several hedge funds that had accused Caesars of scrapping a guarantee on the debt of its bankrupt subsidiary, Caesars Entertainment Operating Co. Inc. (CEOC). A judgment in New York was due as soon as Thursday.
“The risk that the Trilogy action will derail the reorganization is too great,” Judge Benjamin Goldgar said in U.S. Bankruptcy Court in Chicago on Wednesday.
CEOC has secured the support of creditors who until last week were threatening its Nasdaq-listed parent with billions of dollars in claims over a series of transactions prior to the unit’s bankruptcy filing in January 2015 with $18 billion of debt.
Shares of Caesars closed up 6 cents, or 0.79 percent, at $7.70. The stock has risen about 14 percent since the company unveiled its sweetened offer for holdout creditors on Sept. 21.
Goldgar said the injunction on all remaining litigation against Caesars was necessary to preserve the settlement and could last through a January trial to confirm CEOC’s reorganization plan.
Trilogy immediately appealed Goldgar’s ruling and U.S. District Court Judge Robert Gettleman in Chicago scheduled a Dec. 5 hearing.
CEOC filed a formal restructuring support agreement with all of its major creditors on Wednesday, subject to certain conditions such as the injunction on litigation against Caesars remaining in place. It said the agreement is a “key milestone” in its effort to implement a consensual restructuring.
CEOC will cut over $10 billion of debt and split into an operating company and a separate real estate investment trust as part of its plan to emerge from bankruptcy in 2017.
Following the restructuring, private equity shareholders Apollo Global Management and TPG Capital Management LP will hold 16 percent in a new Caesars casino group.
Apollo and TPG formed Caesars through the $30 billion leveraged buyout of Harrah’s Entertainment in 2008, just before the U.S economy tipped into recession.