Beleaguered casino operator Caesars Entertainment has won a temporary reprieve from having to face creditor lawsuits.
On Wednesday, US Bankruptcy Court Judge Benjamin Goldgar told Caesars he had suspended bondholder lawsuits in Delaware and New York until Aug. 29. The period is shorter than Caesars had requested and Goldgar said the likelihood of him renewing the freeze after that date “will be slim.”
Caesars is attempting to restructure its main unit Caesars Entertainment Operating Co (CEOC), which filed for bankruptcy in January 2015, citing over $18b in debt.
Junior creditors, who have been asked to bear most of the fiscal pain of this restructuring, have filed lawsuits accusing CEOC’s parent company Caesars Entertainment Corporation (CEC) of illegally shifting profitable assets out of CEOC into other CEC divisions prior to the bankruptcy filing.
The creditors have also accused CEC’s hedge fund owners Apollo Global Management and TPG Capital of conspiring to ensure that the parent company was absolved of the obligation to honor its subsidiary’s massive debts.
The Delaware trial, which involves $3.7b in CEOC’s debt, was scheduled to commence on Thursday. The New York trial, which involves over $7b, had a hearing scheduled for next week. Caesars has argued that if these courts find CEC liable for CEOC’s debts, CEC will have to join CEOC in bankruptcy court.
CEC recently attempted to improve upon its original paltry offer that would have paid junior creditors pennies on the dollar. CEC’s hand was forced by the findings of an independent examiner, who determined that the asset transfers left CEC vulnerable to up to $5.1b in additional claims.
While Caesars execs expressed relief at Wednesday’s ruling, Goldgar warned them not to squander this opportunity. “There better be some conversations. You’ve got that time. Use it.”
The parties will be back in Goldgar’s Illinois court on June 22 for a hearing on CEOC’s request to allow creditors to vote on the company’s latest restructuring plan.