Lower-level creditors of Caesars Entertainment Operating Company (CEOC), the bankrupt largest unit of Caesars Entertainment Corporation, have added one more lawsuit to the list of litigation filed against the operator. Second-tier bondholders are claiming that senior lenders should have the repayment guarantees of their loans overturned, as the operator did with the lower-level creditors.
Caesars has been trying to convince enough lower-level creditors to sign off on the restructuring agreement it reached with top-tier bondholders of CEOC that would slash $10 billion in debt from the unit. The company has to convince around half of the lower-level creditors to sign off on the plan.
The lawsuit joins several other cases attacking the restructuring plan, including allegations that asset transfers the operator made to move valuable properties out of reach of creditors were illegal, and that the company illegally cancelled payment guarantees for lower-level creditors to avoid paying interest on the loans, hoping to wait out the bankruptcy and ultimately give the creditors a fraction of what they are owed.
The lawsuit also accuses Caesars of trying to buy votes of creditors to get the restructuring plan approved. The complaint, filed in Chicago bankruptcy court, alleges Caesars promised $200 million in “improper payments” to creditors to secure their support of the operator’s bankruptcy plan.
Caesars’ plan would split CEOC into two entities, a real estate investment trust that would own the properties and a management company that would lease them from the REIT.
