Lynn Swann’s personal assets up for grabs in Caesars bankruptcy?

lynn-swann-caesars-bankruptcyCould former National Football League great Lynn Swann lose his personal fortune if creditor lawsuits go against casino operator Caesars Entertainment Corp (CEC)?

Swann, the former Pittsburgh Steelers wideout who was inducted into the NFL Hall of Fame in 2001, has been an independent director of CEC since the company was taken private in 2008. Swann was one of three CEC directors who approved the controversial transfer of profitable assets out of CEC’s main unit Caesars Entertainment Operating Co (CEOC) before it filed for Chapter 11 bankruptcy this January.

On Thursday, the New York Post quoted two sources saying that lawsuits brought by junior creditors protesting these asset transfers could lead to claims of personal liability against Swann and the other two directors who gave thumbs up to the suspect deals.

However tantalizing that prospect from a media perspective, the existence of corporate liability insurance means Swann isn’t likely to be out on the street hawking pencils out of a cup, even if the courts do side with the creditors. That is, unless reducing said insurance was among the cost-cutting moves CEC elected to make on its way to bankruptcy court.

Meanwhile, junior creditors have asked the Illinois judge handling CEOC’s bankruptcy to issue a restraining order preventing CEC from continuing “its illegal vote-buying campaign.” CEC has been lobbying creditors to sign on to its post-bankruptcy restructuring plan for CEOC, under which the company would eliminate nearly $10b of its $18.4b debt, the cost of which would largely be borne by junior creditors.

Many of CEOC’s first-lien creditors have signed on with the plan, but second-lien creditors are proving a tougher sell. CEC has to get a significant number of creditors to approve its restructuring plan and junior creditors claim CEC has promised at least $200m in improper payments to convince second-lien creditors to drop their opposition.

We won’t know until sometime next month whether a US District Court judge will uphold US Bankruptcy Court Judge Benjamin Goldgar’s July ruling that junior creditor lawsuits in other states aimed at dragging CEC into the bankruptcy process could proceed. One thing is already painfully obvious; the only real winners here are the lawyers. Again.