Attorneys for Caesars Entertainment Operating Company (CEOC), the largest operating unit of Caesars Entertainment, have won a second chance to avoid dealing with shareholder lawsuits filed in New York during its hearings to approve a Chapter 11 restructuring plan in U.S. Bankruptcy Court in Chicago.
The U.S. Court of Appeals for the Seventh Circuit in Chicago held that lower-court judges used faulty reasoning to deny Caesars Entertainment’s request that New York lawsuits against the company, filed by lower-level creditors, be halted during bankruptcy proceedings. U.S. Bankruptcy Judge A. Benjamin Goldgar upheld the decisions. The case is now being sent back to him.
The lawsuits claim parent Caesars Entertainment, owned by private equity firms Apollo Global Management and TPC Capital, made a series of illegal asset transfers to protect valuable assets from seizure during bankruptcy—and to avoid paying $7 billion in debt to the second-lien bondholders. The restructuring deal hammered out last year with top-lien bondholders, meanwhile, is likely to crumble without those transactions, throwing the parent company into bankruptcy.
CEOC lawyers are seeking to halt the lawsuits on the basis they threaten the ability of the operating unit to reorganize.
