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Shares of the Nevada-based gaming company fell 12 percent
after-hours.
Caesars Entertainment Operating Co (CEOC), which filed for
Chapter 11 protection in January 2015, was asking for a third
court shield from lawsuits against its parent to protect a
multibillion-dollar contribution to its reorganization plan.
The high-stakes CEOC bankruptcy has been plagued by a complex
web of litigation pitting some of the most aggressive investors
on Wall Street against each other.
A current injunction expires on Aug. 29, a day before Caesars
faces a potential ruling in New York on lawsuits from
bondholders alleging it reneged on guarantees from bonds issued
by CEOC prior to the unit's $18 billion bankruptcy.
CEOC had argued that another halt to a decision on those
lawsuits was critical to securing a settlement with holdout
creditors before its reorganization plan heads to a confirmation
trial in January.
"I can't find that an injunction is likely to enhance the
prospects for negotiation," U.S. Bankruptcy Judge Benjamin
Goldgar in Chicago said in his courtroom ruling.
Bitter creditors accuse Caesars and its private equity sponsors
Apollo Global Management LLC <APO.N> and TPG Capital Management
LP [TPG.UL] of stripping the unit of choice assets such as the
LINQ Hotel & Casino in Las Vegas and leaving it bankrupt.
Caesars, Apollo and TPG have denied any wrongdoing, though a
court-appointed examiner found they could be on the hook for up
to $5.1 billion in claims.
To settle the allegations Caesars has offered to pitch about $4
billion into CEOC's reorganization in exchange for releases from
the claims. Goldgar asked on Friday why Apollo and TPG were not
also contributing, saying the injunctions to date had provided
them "a comfortable free ride" on CEOC's "coattails".
Both Caesars and CEOC said they were disappointed by the
decision. The court's refusal to extend the shield puts Caesars'
"substantial contribution" to CEOC's reorganization plan "at
serious risk," a Caesars spokesman said in an email.
CEOC lawyers said they planned to appeal the ruling.
"It would be hard to reverse Goldgar without dramatically
expanding the availability of third-party releases, something
that would be out of step with the standards in other circuits,"
said Douglas Baird, a professor at the University of Chicago Law
School.
(Editing by Meredith Mazzilli and Matthew Lewis)
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