Judge Weighs Another Lawsuit Reprieve for Caesars
August 26 2016 - 12:50AM
Dow Jones News
CHICAGO—The federal judge weighing whether to grant Caesars
Entertainment Corp. another reprieve in an $11 billion legal battle
on Thursday raised the possibility that settlement talks might make
more progress if litigation involving bondholders is allowed to
proceed.
As lawyers wrapped up their arguments Thursday over a proposed
litigation shield for Caesars, Judge A. Benjamin Goldgar of the
U.S. Bankruptcy Court in Chicago asked if past settlement talks
were "more productive" when such a shield wasn't in place.
The judge then wondered whether the temporary litigation shield
he previously granted has had "exactly the opposite effect" by
discouraging settlement talks.
Caesars, which isn't in bankruptcy, faces lawsuits demanding
that it honor guarantees of more than $11 billion of its bankrupt
operating unit's bond debt. Caesars says the guarantees are no
longer valid.
Judge Goldgar, who is overseeing the operating unit's chapter 11
case, has previously enjoined, or halted, the litigation. That
shield will expire Monday, however, unless he renews the
injunction. If he doesn't, New York and Delaware courts could issue
speedy rulings on the disputed guarantees in a matter of weeks.
A ruling is expected Friday afternoon.
Lawyers for the bankrupt Caesars Entertainment Operating Co., or
CEOC, unit argue the success of its chapter 11 case, pending for
more than 19 months, is on the line. They say the injunction is
needed to protect 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.
"Let us finish the job," CEOC lawyer David Zott said in court
Thursday.
"That's what you asked me for last time," Judge Goldgar
responded. "So the job wasn't finished? What's to make me think
that it will be if I grant you what you want this time?"
Mr. Zott, of Kirkland & Ellis, cited testimony from an
adviser to the bankrupt operating unit, who earlier this week said
a settlement is "close."
Bondholders, however, say protecting Caesars has so far
discouraged settlement talks and will continue to do so. They say
allowing their litigation to proceed will level the playing
field.
"There's nothing about another injunction that would be
equitable or fair," said Jones Day lawyer Jim Johnston, who
represents bondholder plaintiff Wilmington Savings Fund
Society.
CEOC sought chapter 11 protection in January 2015 with some $18
billion in debt, the product of a 2008 leveraged buyout by
private-equity firms Apollo Global Management and TPG, currently
Caesars' majority owners.
The major hurdle in CEOC's chapter 11 case has been securing
unanimous creditor support for a broad deal to settle legal claims
against Caesars and the private-equity firms.
A court-appointed investigator found that a series of
prebankruptcy transactions orchestrated by Caesars and its backers
moved valuable assets away from CEOC, hurting the now-bankrupt
company and its creditors.
Caesars and its backers staunchly defend the deals, which are
also the subject of the bondholder litigation, and dispute
liability.
Write to Jacqueline Palank at jacqueline.palank@wsj.com
(END) Dow Jones Newswires
August 26, 2016 01:35 ET (05:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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