U.S. bankruptcy judge Benjamin Goldgar, who was overseeing Caesars Entertainment’s operating unit’s bankruptcy stated that it would be difficult to halt bondholder lawsuits against the company in New York and Delaware given that proceedings had already begun.
Several hedge funds were suing the parent casino company for a total of $11.4bn, as it reneged on guarantees on bonds issued by its operating unit, which filed for bankruptcy in January 2015.
Parentco Caesars was planning to pump about $4bn into its operating unit to help restructure it.
Legal action against the parent could jeopardize the funding and force it into bankruptcy as well, the unit argued in seeking an injunction to stop the lawsuits.
Caesars has the right to terminate its funding agreement by 22 June 2016 if the judge does not halt the lawsuits by 15 June 2016, the unit’s lawyers said at the hearing.
The operating company of Caesars has spent about $1.1bn on interest payments on its first lien debt and administrative expenses. Further, if the parentco files for bankruptcy, it may incur additional expenses of $200m in restructuring costs.
Separately, according to an independent examiner’s report in March 2016, Caesars and its private equity sponsors Apollo Global and TPG Capital could face $5bn in damages from the operating unit’s bankruptcy. Junior bondholders are claiming $12.6bn as part of the bankruptcy.
According to a retired federal judge brokering a restructuring deal for Caesar’s Entertainment Corp.‘s bankrupt operating unit, talks between the casino operator and a group of creditors have stalled, making settlement look unlikely at the moment.
It appears that Caesar’s declined to participate in a meeting with junior bondholders beyond the meeting held on 7 April 2016.
Caesar’s operating unit planned on restructuring c.$18bn of debt at the time of filing for bankruptcy which resulted in claims being filed by creditors, including junior bondholders.
It appears that as per Caesar’s latest settlement agreement, claims valued by the company at $4bn significantly undermined the value identified by junior bondholders at $12bn.
The operating unit’s restructuring plan would be put to vote in a Chicago court on Tuesday which faces opposition from all classes of creditors.
As per court filings made on Monday, Caesar’s operating unit stated that restructuring talks progressed well with senior and general class of creditors but its junior bondholders posed a significant challenge.
According to a lawyer representing Caesars Entertainment Corp’s bankrupt unit, the parent company would contribute c.$4bn to the restructuring of its operating unit, Caesars Entertainment Operating Co., in exchange for release of broad liabilities.
The contribution would be made in the form of equity, cash and debt, and was more than the $1.5bn pledged earlier by parent company.
According to Caesar’s lawyer, it appears the parent company’s support for its operating unit is not entirely assured.
As per the new plan filed by Caesars, potential recovery on claims filed by creditors is as follows:
- Senior lenders would recover between 113 – 117% of their claims through a combination of cash, equity and debt.
- Senior bondholders would receive between 96 – 128% on their claims through cash, debt and equity.
- Junior creditors would have their debt converted to equity
- Junior bondholders would recover between 22 – 48% of their claims subject to terms of the plan.
- General unsecured creditors would receive between 30 – 46% on their claims.
The judge overseeing the case agreed to review the outline of the new plan at a hearing in June 2016.
U.S-based casino operator Caesars Entertainment Corp. appointed Robert Gerber as its restructuring officer to oversee it’s negotiations with creditors.
The appointment was made at the request of the company’s Strategic Alternatives Committee, a group comprising of the company’s three independent directors.
The company has been unable to reach an agreement with its lenders since placing its largest unit under restructuring in January 2015.
The company stated that restructuring-related legal bills has reached $345m and that if it was unable to get access to additional funds, it may have to place its parent company under bankruptcy protection.