Casino operator Caesars Entertainment has been warned that the judge overseeing the bankruptcy of its main unit could force the process into liquidation.
On Wednesday, US Bankruptcy Court Judge Benjamin Goldgar warned Caesars that its main unit could be forced into liquidation proceedings if it continued efforts to block the release of a court-appointed examiner’s report into the company’s pre-bankruptcy transactions.
Caesars has been attempting to restructure its bankrupt main unit Caesars Entertainment Operating Co (CEOC) for a year now but junior creditors are fighting the company’s plan to force them to bear the brunt of slashing CEOC”s $18.4b debt in half.
The bankruptcy process has also been held up waiting for a report by former Watergate prosecutor Richard Davis into allegations that Caesars improperly (a) reneged on billions in debt obligations and (b) stripped CEOC of its most lucrative assets – including its online gaming division – prior to filing for bankruptcy in order to shield them from claims by junior creditors.
On Thursday, the New York Post quoted sources saying that Davis’ report will side with junior creditors by declaring that there were “deficiencies” and “a degree of civil fraud” in Caesars’ pre-bankruptcy activities. If these sources are accurate, Davis’ report could lead to legal actions against members of Caesars’ board of directors. State gaming regulators could also launch inquiries into the company’s suitability to hold gaming licenses.
On Wednesday, Goldgar slammed Caesars for attempting to slap a ‘privileged information’ tag on seven million pages of documents produced in Davis’ investigation. Goldgar noted that Davis’ report was supposed to hasten the resolution of the bankruptcy process but he accused Caesars of now wanting to “have it both ways.”
Goldgar authorized Davis to file a public summary of his findings along with a redacted report until the wrangling over the full report’s release is resolved. A lawyer appearing on Davis’ behalf told Goldgar that the info would be ready for release by the end of February.
But Goldgar warned Caesars that unless the parties can reach agreement on what info is made public, the case would take “rather a different turn from the one that I imagine the debtor and its parent and its affiliates would like to see.”
Goldgar said these different turns could include the dismissal of the bankruptcy, the appointment of a trustee, “or, my favorite, the case could be converted to Chapter 7 [liquidation], which would just be a hoot, wouldn’t it?”