Casino operator Caesars Entertainment’s interminable bankruptcy proceedings got even more complicated after word broke that the court-appointed mediator had abruptly resigned.
Back in March, retired judge Joseph Farnan was enlisted to mediate negotiations between creditors and Caesars’ bankrupt main unit, Caesars Entertainment Operating Co (CEOC). On Friday, Farnan submitted his letter of resignation, saying “recent events have convinced me that I am unable to continue the mediation process.”
Caesars has been trying to win approval of its restructuring plan ever since CEOC filed for Chapter 11 bankruptcy protection in January 2015. Junior creditors have balked at Caesars’ lowball offers, and have filed lawsuits in New York and Delaware challenging the pre-bankruptcy asset transfers that stripped CEOC of much of its value and for Caesars having reneged on pledges to honor CEOC’s debts.
Two weeks ago, US Bankruptcy Judge Benjamin Goldgar ruled that those lawsuits could proceed based on the apparent lack of progress in the restructuring negotiations. A different federal judge has stayed those lawsuits until October 5 to allow Caesars to appeal Goldgar’s ruling.
Goldgar’s ruling was sparked by what he perceived to be a paucity of detail in a report on the negotiations Farnan submitted to the court. Goldgar took particular issue with the lack of financial commitment by Caesars’ hedge fund owners Apollo Global Management and TPG Capital.
Farnan’s letter said his report lacked detail because he didn’t want to “breach the confidentiality of the mediation and testify in open court or describe the discussions and proposals exchanged.” Farnan believes Goldgar “doesn’t understand how such disclosures would be viewed by participants and the markets.”
In a separate document filed with the court on Wednesday, Apollo execs claimed Farnan had asked the two hedge funds to contribute $250m to the deal offered to creditors. Bloomberg Markets quoted the Apollo execs saying that contribution never happened because creditors had demanded “several times” that sum.
It’s unclear what impact Farnan’s resignation will have on the proceedings. Caesars has been given until Jan. 17, 2017 to reach a final deal with its creditors. However, those creditor lawsuits appear likely to get underway well before that date. Caesars has said it will have to join CEOC in bankruptcy if it is forced to honor CEOC’s $18.4b debt load.