Caesars Entertainment, struggling to get through a bankruptcy reorganization for its largest unit, saw its stock plunge to a 52-week low, due to investor jitters over the bankruptcy case of its largest operating unit, Caesars Entertainment Operating Company (CEOC).
The stock price sunk to $6.41 on June 5, after a federal judge in New York ruled that she can hear arguments on the four separate lawsuits filed against Caesars by lower-level creditors, who claim they were intentionally left holding the bag for $750 million in debt after the operator negotiated a restructuring package with first-lien bondholders.
The plan resulting from those negotiations would slash CEOC’s debt from $18 billion to around $8 billion. Parts of that plan hinge on transactions made by the operator prior to the January 15 bankruptcy filing to move assets into a real-estate investment trust. The lawsuits by lower-level creditors claim those transactions were illegal, and claim Caesars improperly canceled repayment guarantees on the loans.
Should the New York judge rule against Caesars, Chicago Bankruptcy Judge Benjamin Goldgar could validate the involuntary bankruptcy petition filed by creditors three days before the CEOC filing, sending the parent Caesars Entertainment into Chapter 11 bankruptcy and scuttling the reorganization plan.
