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29 January 2015
By Howard Stutz
LAS VEGAS -- A bankruptcy judge in Delaware ruled Wednesday the reorganization of Caesars Entertainment Corporation's largest operating union will take place in Chicago, where the company filed a prepackaged Chapter 11 earlier this month.
Allowing the case to proceed in Chicago is considered a victory for the company and its private equity backers, Apollo Global Management and TPG Capital.
A group of hedge fund creditors led by Appaloosa Management filed an involuntary bankruptcy against Caesars and wanted the case to proceed in Delaware.
Creditor attorneys had said that Caesars filed in Illinois partly because it will be easier to shield company officials there from lawsuits over what they allege were improper transfers to shield the operating unit’s assets from creditors, The Associated Press reported.
According to news reports, U.S. Bankruptcy Judge Kevin Gross in Wilmington, Del., said his "overriding consideration is that the debtors chose the Illinois court." He added that allowing the creditors to win would be "bad precedent."
He said the creditors "raced to the courthouse" once it was known Caesars would be filing the prepackaged bankruptcy.
UNLV Boyd School of Law professor Nancy Rapoport, who specializes in bankruptcy matters, said the ruling was a clear win for Caesars. But she cautioned that it is still too early to tell if the case will proceed smoothly.
"A lot depends on what unrolls over the next few weeks," she said. "This is a complicated, big bankruptcy with a lot of thorny issues."
In an e-mailed statement, Caesars spokesman Stephen Cohen of Teneo Consulting said the company believed Chicago was the correct location for restructuring.
The restructuring of Caesars Entertainment Operating Co. will eliminate almost $10 billion of the division's $18.4 billion debt load.
Under the company's bankruptcy plan, Caesars seeks court approval to convert CEOC into a publicly traded real estate investment trust. CEOC controls Caesars Palace, Caesars Atlantic City, Harrah's Reno Casino and Hotel and more than a dozen regional properties.
"The Midwest is an important hub of CEOC's operations and we look forward to implementing our comprehensive financial restructuring plan in the Bankruptcy Court for the Northern District of Illinois in Chicago," Cohen said. "We remain focused on using the restructuring process to reduce CEOC's debt and strengthen its financial position."
The REIT concept would split CEOC into two companies, including one owning real estate for many of the company's casinos. A second company would manage the properties and pay a rent to the ownership company.
The reorganization came about after several months of negotiations between Caesars officials and the company's primary bondholders and lenders. Caesars has companywide long-term debt of $22.8 billion.
Caesars has said in previous statements that all company properties, including those owned by CEOC, are operating normally.
Caesars Palace is the only Las Vegas property covered in the bankruptcy filing.
Copyright GamingWire. All rights reserved.
Judge's ruling on Chicago court seen as win for Caesars is republished from Online.CasinoCity.com.
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