CZR Caesars Entertainment Inc

CHICAGO—Continued sparring over an investigation into dealings between Caesars Entertainment Corp. and its bankrupt operating unit could torpedo the unit's restructuring, a bankruptcy judge suggested Wednesday.

Judge A. Benjamin Goldgar of the U.S. Bankruptcy Court in Chicago on Wednesday warned Caesars, its bankrupt unit and others fighting over which details of the investigation have to be made public. If the fight isn't resolved, "then this case is going to take rather a different turn from the one that I imagine the debtor and its parent and its affiliates would like to see," he said.

Rather than allowing the unit's current management to remain in charge, Judge Goldgar listed a number of other paths the Caesar unit's chapter 11 case could take.

"It doesn't have to end with a confirmed plan," the judge said. "A trustee could be appointed, the case could be dismissed or, my favorite, the case could be converted to chapter 7 [liquidation], which would just be a hoot, wouldn't it?"

Judge Goldgar's remarks came after hearing seven million pages of documents produced in the investigation are considered confidential or privileged by Caesars, the operating unit and others, posing an obstacle to examiner Richard J. Davis's efforts to make his conclusions public.

The investigation into prebankruptcy dealings between Caesars, which isn't in bankruptcy, and its Caesars Entertainment Operating Co., or CEOC, unit, looms large over CEOC's bankruptcy-exit plan, which seeks to settle its potential legal claims against its parent related to the deals. Senior creditors have largely agreed to the plan, while others continue to hold out, waiting for the examiner's conclusions, among other reasons.

"The centerpiece of this case was supposed to be the examiner's report. We've all been waiting," Judge Goldgar said Wednesday. "This was what was going to blow up the logjam."

Caesars' and CEOC's attorneys told the judge they support the investigation and reiterated the importance of having a full report of the examiner's findings. They said they would continue working to resolve the disputes, though that didn't stop Judge Goldgar from continuing to express his concerns.

"You can't have it both ways," he said. "You can't have a bankruptcy case depend upon an [examination] and ask that everyone be patient while the examiner does all this work and then, on the theory that the report will then allow everybody to walk away smiling, holding hands…object to the release on the grounds of privilege," he said. "If that's the position that the debtors are taking here, then that's what raises in my mind the prospect of other possible outcomes for this case."

The judge ultimately decided to authorize the examiner to publicly file a summary of his findings, and a redacted report, when it is ready while the disputes are worked out.

Dan McGuire, a layer for Mr. Davis, told the judge the examiner expects to be able to share his findings next month.

Write to Jacqueline Palank at jacqueline.palank@wsj.com

(END) Dow Jones Newswires

January 20, 2016 18:05 ET (23:05 GMT)

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