Bankruptcy watchdog objects to Caesars deal

Bankruptcy watchdog objects to Caesars deal

Thursday, November 24, 2016 Posted by Andy McCarron
US trustee says the deal represents a ‘blanket immunity’

The protracted Caesars Entertainment bankruptcy battle would appear to have one last twist in the tale after the US government bankruptcy watchdog objected this week to the proposed plans for the company to exit Chapter 11 receivership.

The move has the potential to derail the otherwise almost consensual plans that would slash circa $10bn from the Caesars debt load and allow the subsidiary Caesars Entertainment Operating Company (CEOC) to finally come out of bankruptcy protection.

In late October, Caesars said it had approvals from all but a handful of its debt-holders for a restructuring of the bankrupt CEOC operation. The agreement means that the private equity owners of Caesars, TPG and Apollo, will surrender their majority interest in Caesars Entertainment in return for a release from liability claims that could have totalled up to $5bn.

The deal had originally been rejected by a substantial minority of second-lien bondholders who felt they were receiving less than compensation than they believed they were due.

In a filing lodged with the bankruptcy court in Chicago, the US Trustee objected to what it called the “blanket immunity” contained within the deal. The US Trustee, which oversees the administration of bankruptcy cases, also criticised the legal releases as too broad for shielding against wilful misconduct or actual fraud.

If the US trustee disagrees with the agreement, it could appeal to a higher court.

The Caesars bankruptcy has been one of the longest-running sagas in the sector. The actual proceedings began in January this year. The deal as agreed would see the creditors gain control of the company with circa 70% of the company.

The Trustee objection shouldn’t be too surprising. During the bankruptcy proceedings, judge Benjamin Goldgar criticised the original proposal as originally detailed on the basis that the terms of PTG and Apollo appeared too lenient.

The agreement is set to go before the judge in January after which the company would emerge with a new debt structure and new owners.

Totally Gaming says: The latest spanner in the works will no doubt come as a blow to both Caesars and its current and future owners. It is hard, without being a bankruptcy expert, to see what could be gained from the US Trustee intervention. It certainly prevents the business being able to move forward and concentrate on operations. 

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