Two More Caesars Bondholder Lawsuits Must Go to Trial
January 06 2016 - 3:30PM
Dow Jones News
A federal judge has dealt another blow to bondholders suing
Caesars Entertainment Corp. over deals involving its bankrupt
operating unit, refusing to decide an important issue in two
lawsuits without a trial.
At stake in the dispute is whether Caesars remains on the hook
for guarantees of billions of dollars of its operating unit's debt,
as the bondholders argue, or whether a series of deals effectively
erased those guarantees, as Caesars argues.
Judge Shira A. Scheindlin of the U.S. District Court in
Manhattan explained her decision in a ruling on Tuesday, saying
that "because I have now concluded that there is a disputed issue
of fact with respect to whether [Caesars' bankrupt unit] continued
to be a wholly owned subsidiary of [Caesars]…plaintiffs cannot
prevail here."
The decision ends the bondholders' hope of an immediate decision
from Judge Scheindlin on key claims but doesn't exclude the
possibility that a decision at the end of trial will be in their
favor. On the other hand, a bankruptcy judge could rule to prevent
Caesars from having to go to trial while its operating unit's
chapter 11 case is pending.
The ruling, which applies to two lawsuits, comes on the heels of
Judge Scheindlin's decision to deny a similar bid in other lawsuits
brought by another group of bondholders, including MeehanCombs
Global Credit Opportunities Master Fund LP, and a class-action
lawsuit led by bondholder Frederick Barton Danner.
The two lawsuits were brought by bondholder trustees BOKF and
UMB Bank and concern whether Caesars is responsible for roughly $7
billion in junior and senior bonds issued by its bankruptcy
unit.
Ahead of the unit's bankruptcy filing last January, Caesars
engineered several transactions that moved assets between it and
the unit, the legality of which has been questioned.
Neither a spokesman for Caesars nor lawyers for BOKF and UMB
immediately responded to requests for comment on Wednesday.
Caesars has been scrambling to hold off these pretrial decisions
by Judge Scheindlin while it continues to argue in Chicago courts
that the shield protecting its bankrupt unit from these lawsuits
should apply to it as well, even though it isn't under bankruptcy
protection.
Caesars has lost twice in efforts to get Chicago judges to bar
bondholders from continuing the barrage of litigation. On Dec. 23,
however, a federal appeals court asked the bankruptcy judge to take
another look at the question of whether Caesars deserves the
litigation shield.
Previously, Caesars has said losses in the New York bondholder
suits could jeopardize its ability to make a significant
contribution to the reorganization of its operating unit and could
force it to join its unit in bankruptcy.
Peg Brickley contributed to this article.
Write to Stephanie Gleason at stephanie.gleason@wsj.com
(END) Dow Jones Newswires
January 06, 2016 15:15 ET (20:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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