The bankruptcy case of Caesars Entertainment Operating Company (CEOC), the largest operating unit of Caesars Entertainment, may have reached a critical juncture. Last week, U.S. Bankruptcy Judge A. Benjamin Goldgar said he will consider dismissing CEOC’s bankruptcy case, or even converting it to a Chapter 7 liquidation, unless Caesars unseals a report logging results of a probe into controversial transactions made prior to the Chapter 11 filing in January 2015.
Those transactions are at the heart of lawsuits from lower-level creditors, who claim that Caesars Entertainment illegally transferred its most profitable properties out of CEOC to shield them from creditor seizure. Goldgar ordered an independent investigation in March into the transactions, which Caesars used as an excuse to halt interest payments on billions in debt held by mostly second-tier bondholders.
The transactions set the stage for CEOC’s reorganization plan, which it negotiated over four months with its top-tier bondholders. Should they be deemed illegal, it would likely force the parent Caesars Entertainment into bankruptcy.
A lawyer for the independent examiner, Richard Davis, testified last week that Caesars had asked for the voluminous report to be filed under seal. Goldgar was reportedly furious.
“You can’t have a bankruptcy process dependent on an examiner’s report on the theory that the report will then allow everyone to walk away smiling and holding hands, and then object to it ever being released,” Goldgar said, according to Reuters. He ruled that a redacted version of the report can be filed by the end of February, but that the examiner must prepare a procedure to release the entire 7 million-page report.
Caesars plans to seek approval of its bankruptcy plan 60 days after filing the examiner’s report.
