Cash strapped casino operator Caesars Entertainment has warned that creditors’ lawsuits pose a threat to the company’s continued existence.
In a year-end filing with the US Securities Exchange Commission, Caesars says “uncertainties” relating to the lawsuits have left “substantial doubt regarding [Caesars] ability to continue as a going concern.”
Caesars said it believes it is “not probable” that these lawsuits would be resolved to the company’s disadvantage, but should they be proven wrong, the repercussions could have “a material adverse effect on our business, financial condition, results of operations and cash flows.”
Caesars’ main unit Caesars Entertainment Operating Co (CEOC), which holds 80% of the parent company’s debt, filed for Chapter 11 bankruptcy in January. Caesars has worked out a restructuring plan that would pay junior creditors about 10% of the $5b they’re owed, which isn’t sitting well.
Anticipating this screw-job, junior creditors filed multiple lawsuits last year, accusing Caesars of looting CEOC of its glitzier assets to shield them from the inevitable bankruptcy. Last week, US Bankruptcy Judge A. Benjamin Goldgar ordered an examiner to probe Caesars’ files for signs of chicanery surrounding these transfers and any other dirt they might uncover.
Meanwhile, Caesars is taking full advantage of its bankruptcy by voiding contracts with third parties. Last week, Judge Goldgar approved Caesars’ request to walk away from a $12k per month luxury suite deal at the Kansas City Chiefs’ football stadium. Arrowhead Stadium officials have said Caesars can use the suite one last time in August for a concert but the stadium is keeping Caesars’ $12,580 deposit.
Caesars also got the nod to tear up a $310k per month room reservation contract with Springhill Suites, a hotel near Caesars’ Louisiana Downs Racetrack and Casino. The hotel’s majority owner says the property won’t survive without the Caesars’ room deal. That would also impact Caesars, which owns 49% of the hotel, but at this point Caesars has more buildings than millions, so prep ‘er for demolition then try to sell the bricks.
Goldgar has yet to rule on whether Caesars can void contracts with the New York Mets, the Los Angeles Forum and a motor coach firm, which are collectively worth $350k per month.
