Casino giant Caesars Entertainment Corp. has until at least Oct. 5 before it may have to face lawsuits that could force the company into bankruptcy alongside its operating unit.
A Chicago federal judge on Tuesday agreed to halt the lawsuits while the operating unit appeals a lower-court ruling that favored bondholders seeking to enforce more than $11 billion in claims.
Caesars Entertainment Operating Co., or CEOC, which filed for Chapter 11 protection in January 2015, will return to court on Oct. 5 to argue that the judge overseeing its bankruptcy erred when he lifted the lawsuit shield last week.
U.S. District Judge Robert W. Gettleman said he would probably decide at the October hearing whether to overturn the bankruptcy judge, but he warned CEOC that it faced an “uphill” fight.
The temporary halt to the lawsuits means Caesars won’t immediately face potential losses in a group of cases that have been winding their way through courts in Delaware and New York for more than a year.
The bondholder disputes are the biggest hurdle CEOC must clear before it can exit bankruptcy. The suits, which a court-appointed examiner found have a good chance of succeeding, give CEOC bondholders leverage to boost their recoveries above the 34 percent they’re being offered in the proposed reorganization.
The bondholders claim that the parent company, at the direction of owners Apollo Global Management LLC and TPG Capital LP, abandoned a pledge to cover its operating unit’s obligations and divided the business into a profitable “good Caesars” with few debts and a “bad Caesars” that could be put into bankruptcy. Caesars, Apollo and TPG have all denied the allegations and vowed to prove their actions were a legitimate attempt to restructure the unit.
On Aug. 26, U.S. Bankruptcy Judge A. Benjamin Goldgar refused to continue shielding the Caesars parent, which is not in bankruptcy, from the New York cases. He had halted the lawsuits in June to give CEOC and bondholders a chance to negotiate a deal. But last Friday, Goldgar rejected arguments that keeping the lawsuits on ice was the best way to promote a deal with holdout bondholders.
On Monday, a judge halted the suits until mid-September to give CEOC time to prepare paperwork appealing Goldgar’s decision. That, in turn, led to the cancellation of a hearing that had been set for Tuesday afternoon in a group of New York lawsuits that are the closest to a final judgment.