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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Caesars Entertainment receives favorable ruling from federal judge

28 August 2015

A New York federal judge on Thursday denied a legal request by Caesars Entertainment Corp. bondholders that could have sent the entire casino company into bankruptcy.

Bondholders claimed in a lawsuit that Caesars broke federal law when it moved the ownership of several casinos and resorts into a separate holding company.

According to Bloomberg News, U.S. District Judge Shira Scheindlin in Manhattan turned down a bondholder request for an immediate ruling, but said she would hold a hearing after both sides have a chance to collect evidence to bolster their positions.

The bondholders are owed $7 billion by Caesars. The ruling gives Caesars more time to try to make a deal with creditors who have rejected a proposal to end the lawsuit and restructure the debt owed by the operating unit. The company has argued it could be forced into bankruptcy if the judge forced the company to stand behind its debt guarantee.

In January, Caesars placed its Caesars Entertainment Operating Co. into bankruptcy; it is seeking court approval to covert the division into a real estate investment trust. The company hopes to slice almost $10 billion of debt from the division, which controls almost $18.6 billion of the company's gaming industry-high $22.8 billion of long term debt.

The lawsuit does not involve the operating unit or the casinos operated by the division.

According to Bloomberg, the judge reiterated her previous position that Caesars may have violated the federal Trust Indenture Act by stripping debt holders of a repayment guarantee. She said trustees for bondholders must prove Caesars' actions was such a major change to the original debt contract, known as an indenture, that it violated federal law.

Shares of Caesars jumped more than 25 percent in value on Nasdaq when investors learned of the judge's ruling. By the end of the day, the company's stock price closed at $8.71, up 26 cents or 3.02 percent amid a broad market rally that saw the Dow gain 369 points.
Caesars Entertainment receives favorable ruling from federal judge is republished from Online.CasinoCity.com.