Caesars asks to halt creditor lawsuits seeking payment from affiliates

By Kali Hays

New York, March 12 – Caesars Entertainment Corp. (CEC) subsidiary Caesars Entertainment Operating Co., Inc. (CEOC) is seeking an injunction against creditors that have filed lawsuits against non-debtor affiliates and former company directors claiming breach of fiduciary duty and “corporate waste,” according to a complaint filed Wednesday with the U.S. Bankruptcy Court for the Northern District of Illinois.

The defendants include BOKF, NA, Wilmington Savings Fund Society FSB, Meehancombs Global Credit Opportunities Master Fund LP, SB 4 CF LLC, CFIP Ultra Master Fund, Ltd, Trilogy Portfolio Co., LLC and Frederick Barton Danner.

Lawsuits filed by the creditors accuse CEC of fraudulent transfers and aiding and abetting breach of fiduciary duty by its directors and ask the court to enforce CEC’s guarantee of notes issued by CEOC.

As previously reported, BOKF is demanding payment of $750 million in obligations related to CEC’s 12¾% second-priority senior secured notes due 2018 issued under an indenture in April 2010 by CEOC.

In a similar action, Wilmington Savings is demanding payment of $3.68 billion in obligations related to CEC’s 10% second-priority senior secured notes due 2018, also issued under an indenture with CEOC.

According to CEOC’s complaint, “All of these claims concern the very same asset transfers and capital market transactions that will be litigated in the bankruptcy case.”

“Continuation of the actions outside of the bankruptcy cases threatens to harm the debtors’ estate and imperil their ability to reorganize. Many claims in the actions are property of the debtors’ estate, and the remaining claims could deprive the debtors’ of securing substantial contributions from CEC, whether through settlement or litigation, that are necessary to the reorganization.”

CEOC went on to claim that if the lawsuits are allowed to continue, recovery to other creditors will be diminished, insurance shared with non-debtor affiliates will be drawn down to pay for defense costs further depleting estate assets, it will face multiple indemnification claims related to current and former directors, along with “burdensome discovery’ that will distract individuals from their “bankruptcy-related obligations.”

The company asked that the court order an extension of the automatic stay to the creditor lawsuits, or in the alternative, to stay or enjoin the continuation of the actions until the restructuring plan becomes effective.

Caesars is a Las Vegas-based casino-entertainment company that filed for bankruptcy on Jan. 15. The Chapter 11 case number is 15-01145.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.