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Howard Stutz

Caesars shares punished after judge's ruling favors creditors

3 June 2015

Investors hammered the stock price of Caesars Entertainment Corp. over the past two days after a federal judge handed a small victory to creditors seeking to collect $750 million from the casino company’s bankrupt operating division.

Shares of Caesars, traded on the Nasdaq, fell 3.31 percent, or 26 cents, to close at $7.60, the company’s lowest closing price since February 2013. On Monday, Caesars’s shares declined 16 percent in the first trading day after Bloomberg News reported the judge’s ruling late Friday.

The lawsuit is one of several legal actions being taken against Caesars by several creditor groups who fear they will be cut out of recovering any funds through the Chapter 11 bankruptcy reorganization of Caesars Entertainment Operating Co. The division was placed into a pre-packaged bankruptcy in January.

Creditors are suing Caesars over the company’s sale of several casinos, including Planet Hollywood Resort & Casino, Bally's - Las Vegas and Harrah's New Orleans Casino, to subsidiary Caesars Growth Partners in 2014. Caesars Entertainment plans to merge Caesars Growth Partners back into the parent operation after the bankruptcy is concluded.

Caesars outside spokesman Stephan Cohen of Teneo Holdings told Bloomberg in an email the company has “repeatedly argued in court, the parent guarantee was validly terminated in accordance with the terms of the indentures.”

In a Securities and Exchange Commission filing in March, Caesars said the lawsuits represent a “material uncertainty” that could imperil the company’s ability to continue as a going concern.

According to Bloomberg, U.S. District Judge Shira Scheindlin ruled last week in New York the trustee representing CEOC creditors can ask her to rule on parts of the lawsuit without first holding a trial.

A favorable ruling could force Caesars Entertainment into bankruptcy because of the liabilities it would owe.

Caesars Entertainment has a gaming industry high $22.8 billion in long term debt, of which $18.4 billion is attached to CEOC. Through bankruptcy, which was filed in Chicago, the company hopes to eliminate almost $10 billion of the division’s debt and convert CEOC into a real state investment trust.

CEOC controls Caesars Palace, Caesars Atlantic City, Harrah's Reno Casino and Hotel and more than a dozen regional properties.

On Monday, Caesars’s three Atlantic City resorts faced a new challenge. New Jersey lawmakers introduced a bill that would allow three casinos to be built in the northern part of the state. Gov. Chris Christie said he supports the measure.
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