Creditors suing Caesars Entertainment want to force one of the casino operator’s attorneys to explain how the company came to renege on a $7b loan guarantee.
Creditors suing Caesars in Delaware have asked the court to compel attorney Gregory Ezring to testify as to how Caesars Entertainment Corporation (CEC) arrived at its 2014 decision to sell a small piece of its main unit Caesars Entertainment Operating Co (CEOC), which filed for bankruptcy in January.
According to documents obtained by Bloomberg News, junior creditors are looking for info on an April 2014 presentation made to CEC’s board by an attorney who worked with Ezring, whose firm represents Apollo Global Management, one of CEC’s hedge fund owners.
One month after that presentation, CEC sold 5% of its stake in CEOC, a move CEC claims removed the parent company’s responsibility to honor the $7b debt guarantee to junior creditors. These creditors have sued CEC and top Apollo execs in Delaware and New York over the debt reneging and the controversial transfer of profitable assets out of CEOC prior to the bankruptcy filing.
In papers filed with the court handling the suit, CEC said Ezring couldn’t be forced to disclose information regarding the May 2014 presentation due to the info falling under the scope of attorney-client privilege. CEC invoked the same protection for Appllo exec David Sambur, who has acted as the main witness defending CEC’s actions.
But creditors claim Sambur used some of this protected information in a filing with the court defending CEC’s cancellation of the debt guarantee. The creditors say CEC can’t have it both ways, i.e. if CEC can use some of the protected info when it suits their purposes, the creditors are entitled to the same accommodation.
(CEC rival Las Vegas Sands fell victim to the same trap in the wrongful termination suit brought by former Sands China CEO Steve Jacobs. Sands attorneys had argued that certain documents were inadmissible because they couldn’t be transferred to Nevada due to Macau’s data privacy laws, but the judge disagreed after she learned Sands attorneys had already transferred the same data to Nevada so they could vet it in advance.)
CEC rejects the assertion that any of its court filings contained info covered by attorney-client privilege. The parties will argue the point in Delaware Chancery Court later this month.
ASSET TRANSFER INVESTIGATION DELAYS
Over in Illinois, where a different court is handling CEOC’s bankruptcy, the private investigator tasked with examining the legality of those controversial asset transfers has said he won’t be filing his findings any time soon.
In March, US Bankruptcy Judge Benjamin Goldgar appointed former Watergate assistant prosecutor Richard Davis to go through Caesars’ files to determine whether there was any proof of blatant scheming behind the asset transfers. Davis was given until Dec. 15 to present his findings.
This week, Davis said his team was still poring over the 6.4m pages of documents relating to CEC and CEOC. Davis said that many of the documents had only recently been received and that many of the witnesses Davis’ team wants to interview had repeatedly requested delays in sitting for a chat.
Davis said his team will begin discussing his preliminary views with the stakeholders after the Thanksgiving holiday, at which time they will be allowed to contribute more information. Last month, Goldgar approved Caesars’ extension of control over its bankruptcy proceedings by four months until March 15, 2016.