Caesars seeks fresh halt to lawsuits as mediation breaks down

By Tracy Rucinski

CHICAGO (Reuters) – The bankrupt operating unit of Caesars Entertainment Corp asked a U.S. bankruptcy judge to block creditors from pursuing litigation against its parent on Monday, as talks aimed at resolving the complex case broke down with one group of creditors, court papers showed.

The possibility of reaching a consensual agreement on a plan to exit bankruptcy looked remote on Monday after an independent mediator brought in to broker a settlement between the feuding parties said in a filing with the U.S. Bankruptcy Court in Chicago that restructuring talks between the nonbankrupt parent and junior creditors had reached a deadlock.

“It appears that there continues to be quibbling over who gets what part of the pie,” said retired U.S. Bankruptcy Judge Bruce Markell, who teaches law at Northwestern University.

The Caesars operating unit filed for bankruptcy protection in January 2015 with $18 billion of debt.

The parent company has offered $4 billion to help its casino operating unit emerge from Chapter 11, but the plan is opposed by junior creditors who accuse the private equity-backed parent of looting the unit of its best assets before the bankruptcy filing. The junior creditors say they have claims worth as much as $12 billion. Caesars has denied the allegations.

The parent is also facing lawsuits in New York and Delaware by hedge fund bondholders over guarantees on the bankrupt unit’s debt, with judgements worth a combined $11.4 billion expected between this month and next, the unit said in a separate filing with the bankruptcy court in Chicago on Monday.

While Caesars has said the lawsuits are without merit, the operating unit said on Monday that adverse rulings against the parent could unravel its bankruptcy exit plan, put the parent in bankruptcy “and return this restructuring to square one.”

Last month Caesars appointed a retired bankruptcy judge to the new role of chief restructuring officer after it warned it could be forced into Chapter 11 bankruptcy protection.

U.S. Bankruptcy Judge Benjamin Goldgar will hold a hearing on the request to halt the New York and Delaware litigation on Wednesday, a day after a hearing on the bankrupt unit’s disclosure statement, which describes its plan to exit Chapter 11.

(Editing by Matthew Lewis)