CZR Caesars Entertainment Inc

A federal judge has dealt another blow to bondholders suing Caesars Entertainment Corp. over deals involving its bankrupt operating unit, refusing to decide an important issue in two lawsuits without a trial.

At stake in the dispute is whether Caesars remains on the hook for guarantees of billions of dollars of its operating unit's debt, as the bondholders argue, or whether a series of deals effectively erased those guarantees, as Caesars argues.

Judge Shira A. Scheindlin of the U.S. District Court in Manhattan explained her decision in a ruling on Tuesday, saying that "because I have now concluded that there is a disputed issue of fact with respect to whether [Caesars' bankrupt unit] continued to be a wholly owned subsidiary of [Caesars]…plaintiffs cannot prevail here."

The decision ends the bondholders' hope of an immediate decision from Judge Scheindlin on key claims but doesn't exclude the possibility that a decision at the end of trial will be in their favor. On the other hand, a bankruptcy judge could rule to prevent Caesars from having to go to trial while its operating unit's chapter 11 case is pending.

The ruling, which applies to two lawsuits, comes on the heels of Judge Scheindlin's decision to deny a similar bid in other lawsuits brought by another group of bondholders, including MeehanCombs Global Credit Opportunities Master Fund LP, and a class-action lawsuit led by bondholder Frederick Barton Danner.

The two lawsuits were brought by bondholder trustees BOKF and UMB Bank and concern whether Caesars is responsible for roughly $7 billion in junior and senior bonds issued by its bankruptcy unit.

Ahead of the unit's bankruptcy filing last January, Caesars engineered several transactions that moved assets between it and the unit, the legality of which has been questioned.

Neither a spokesman for Caesars nor lawyers for BOKF and UMB immediately responded to requests for comment on Wednesday.

Caesars has been scrambling to hold off these pretrial decisions by Judge Scheindlin while it continues to argue in Chicago courts that the shield protecting its bankrupt unit from these lawsuits should apply to it as well, even though it isn't under bankruptcy protection.

Caesars has lost twice in efforts to get Chicago judges to bar bondholders from continuing the barrage of litigation. On Dec. 23, however, a federal appeals court asked the bankruptcy judge to take another look at the question of whether Caesars deserves the litigation shield.

Previously, Caesars has said losses in the New York bondholder suits could jeopardize its ability to make a significant contribution to the reorganization of its operating unit and could force it to join its unit in bankruptcy.

Peg Brickley contributed to this article.

Write to Stephanie Gleason at stephanie.gleason@wsj.com

(END) Dow Jones Newswires

January 06, 2016 15:15 ET (20:15 GMT)

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