Judge Denies Caesars Litigation Reprieve in Bondholder Battle
August 26 2016 - 5:40PM
Dow Jones News
Caesars Entertainment Corp. must face bondholders in a
multibillion-dollar legal battle that will play out in the coming
days, a federal judge ruled Friday.
Caesars' bankrupt operating unit has previously been able to
protect its parent company from bondholder litigation demanding
that Caesars honor more than $11 billion in guarantees of the
unit's debt.
But Judge A. Benjamin Goldgar of the U.S. Bankruptcy Court in
Chicago, who is overseeing the operating unit's chapter 11 case,
said he wouldn't renew the lawsuit shield when it expires
Monday.
Judge Goldgar's ruling paves the way for courts in New York and
Delaware to rule, in a matter of weeks or even days, on the
question of whether Caesars must honor the debt guarantees. A
federal judge in New York will hear arguments Tuesday in lawsuits
involving $7.7 billion in debt guarantees. Another suit over $3.7
billion in debt guarantees will be argued before a Delaware state
court in September.
A Caesars spokesman said the ruling threatens an estimated $4
billion contribution by Caesars to the restructuring, part of a
broad settlement that aims to resolve the bondholder litigation and
other legal claims.
"Caesars Entertainment agreed to make a substantial contribution
to CEOC to fund distributions to creditors under CEOC's
reorganization plan, including the junior creditors in this
guarantee litigation, enabling CEOC to emerge as expeditiously as
possible," the spokesman said. The bankruptcy court's refusal to
continue to stay the guarantee litigation puts that contribution
and the timeliness for resolution at serious risk."
Bondholders suing Caesars had argued that extending the
litigation shield gives Caesars undue leverage in settlement talks.
Lifting the shield would level the playing field, they said.
Write to Lillian Rizzo at Lillian.Rizzo@wsj.com and Jacqueline
Palank at jacqueline.palank@wsj.com
(END) Dow Jones Newswires
August 26, 2016 17:25 ET (21:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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