When it all looked like hell was going to break loose on Caesars Entertainment Corp. (NASDAQ: CZR), the company has landed a lifeline, though a brief one. Lawsuits relating to billions of dollars in sour bonds will not commence as previously scheduled. Instead, Caesars has won a 2-week extension of protection against those lawsuits.
The two-week extension means that the lawsuits will be delayed until Sept. 16, 2016. Meanwhile, Caesars Entertainment Corp. (NASDAQ: CZR) is trying to avoid them because those lawsuits could push the company into bankruptcy together with its embattled operating unit called Caesars Entertainment Operating Co Inc (CEOC).
A short reprieve
Before Caesars was granted the 2-week protection against the lawsuits, a U.S. court had paved the way for the cases to proceed. Had it not been for the temporary injunction, a U.S. District Court in Manhattan would have commenced hearing oral arguments by several of Caesars’ disgruntled lenders.
$11 billion lawsuits – Caesars Entertainment Corp. (NASDAQ: CZR)
The issue here is that Caesars is being accused of trying to run away from the responsibility of backing bonds issued by CEOC, which is currently bankrupt. It is a long and meandering story of how Caesars created CEOC and proceeded to burden it with debt.
Investors claimed that Caesars Entertainment Corp. (NASDAQ: CZR) may have plotted to renege on its bond obligations when it created CEOC as its operating unit. CEOC went bankrupt in early 2015 with debt totaling $18 billion.
The lawsuits that Caesars is trying to run away from could make it liable for some $11 billion in debt. The company has repeatedly said that facing lawsuits from bondholders for that amount of debt could make it bankrupt. CEOC is backing the parent on that claim. It even says that bringing the cases against Caesars could deny it the opportunity to reorganize given that the Caesars was to give it billions of dollars to support its restructuring plan.
The multibillion-dollar debacle has pitted Caesars Entertainment Corp. (NASDAQ: CZR)’s majority investors disgruntled bondholders led by Appaloosa Management.