The hedge fund execs that control casino operator Caesars Entertainment have been ordered to let Caesars creditors have a peek at their personal bank statements.
Last week, the Chicago judge handling the bankruptcy of Caesars’ main division expressed frustration over his inability to get clarity on exactly how much money Apollo Global Management and TPG Capital were willing to contribute to bridge the gap between what Caesars creditors are seeking and what Caesars is offering.
Caesars Entertainment Operating Co (CEOC) filed for Chapter 11 bankruptcy protection in January 2015, citing $18.4b in debts. Caesars has proposed a restructuring that would halve that debt, with most of the vanished money coming out of junior creditors’ pockets.
Junior creditors have sued CEOC’s parent company over what they claim were fraudulent pre-bankruptcy asset transfers and scrapping of debt guarantees intended to protect Caesars’ more valuable holdings at the creditors’ expense.
The parent company has offered to add an extra $4b to the restructuring plan but only if creditors release the parent from legal liability. Creditors have balked at this demand, noting that an independent examiner has said the parent is liable for up to $5.1b in claims.
On Wednesday, US Bankruptcy Judge Benjamin Goldgar ruled that six Caesars directors – Apollo’s Marc Rowan and David Sambur, TPG’s David Bonderman and Kelvin Davis, and former Caesars execs Eric Hession and Gary Loveman – would have to disclose their personal financial details to junior creditors.
Goldgar said that if the six wanted to be released from potential fraud charges they would first have to prove they can contribute to CEOC’s restructuring. Speaking plainly, Goldgar said the six would have to “pony up the paper.”
Still to be decided is how deep the creditors will be allowed to dive into the execs’ underwear drawers. In court papers released last week, the hedge fund bosses called the creditors’ demands wildly inappropriate, suggesting they appeared more interested in harassment than disclosure.
On Wednesday, Goldgar agreed that creditors should be granted a more “reasonable’ scope of investigation. Goldgar said he’d wait to receive a revised list from the creditors before officially releasing the hounds.