A trustee for senior bondholders holding more than billion in the debt of Caesars Entertainment’s largest operating unit have filed suit against the operator in New York, based on the same allegations raised in lawsuits by lower-level creditors—that Caesars Entertainment’ private-equity owners, Apollo Global Management and TPG Capital, illegally moved assets out of the realm of the operating unit, Caesars Entertainment Operating Company (CEOC), prior to filing bankruptcy, to protect the parents’ equity in those assets.
The support of the senior bondholders for CEOC’s restructuring plan is essential for the operator’s bankruptcy plan to be approved. So far, less than half of the creditors holding parent Caesars Entertainment’s record $24 billion in debt have signed on to the agreement hammered out with senior creditors late last year, and the operator has been unable to gather enough support from first-lien bondholders to push the plan through.
The new lawsuit increases the chances that Bankruptcy Judge Benjamin Goldgar will reject the negotiated restructuring plan, which could start a chain of legal events leading to the parent company being forced into bankruptcy. Lower-level creditors filed an involuntary bankruptcy petition three days before CEOC filed its petition on January 15.
CEOC’s restructuring plan would eliminate $10 billion of the unit’s $18 billion in debt, and allow Apollo and TPG to retain a stake in the operating unit.
The latest lawsuit was filed by UMB Bank, the trustee for investors holding $6.34 billion in the operating unit’s first-lien notes. The plaintiffs are seeking an order forcing Caesars to repay what they are owed, and accuses the company of violating the federal Trust Indenture Act of 1939 in its asset transfers. Like the four other lawsuits, the new case claims that Caesars illegally cancelled the guarantees on loans.
