By Tracy Rucinski
CHICAGO (Reuters) – A U.S. bankruptcy judge on Tuesday pushed back a decision until later this month on whether to allow the operating unit of Caesars Entertainment Corp <CZR.O> to move forward with a restructuring plan vigorously opposed by some creditors.
The casino unit has presented a reorganization plan that includes a $4 billion contribution from its nonbankrupt parent to settle allegations of asset-stripping prior to the unit’s bankruptcy filing in January 2015, with $18 billion in debt.
Junior creditors have said the parent could be on the hook for as much $12 billion in claims. Caesars has denied the allegations.
A mediation meant to help the feuding camps reach a settlement broke down on Monday.
Various groups of creditors said in court on Tuesday that the plan was incomplete, particularly regarding protections from lawsuits it provided to Caesars and its private equity sponsors, Apollo Global Management <APO.N> and TPG Capital [TPG.UL].
Lawyers for the bankrupt unit said that negotiations with creditor groups were continuing and that they would present a new plan by June 15. A description of the plan, known as a disclosure statement, will be presented to the court on June 22, and if approved the bankrupt unit could begin seeking creditor votes.
That will be followed by a confirmation trial later this year. It is unclear whether that process would be “short and sweet or World War III,” Judge Benjamin Goldgar said in U.S. Bankruptcy Court in Chicago on Tuesday.
The restructuring plan envisions splitting the bankrupt unit into an operating company and a real estate investment trust (REIT). While creditors broadly support the essence of the plan, it is opposed by a casino union and lawmakers.
“Our analysis of Caesars’ bankruptcy plan is that it doesn’t fix the underlying structural problems and may wind up with another trip to the bankruptcy court,” said Ben Begleiter of Unite Here, a union for thousands of Caesars staff.
Last week, members of U.S. Congress urged Treasury Secretary Jack Lew to deny Caesars a favorable tax ruling relating to the proposed REIT, a move that would undermine the plan.
The parent is also facing lawsuits in New York and Delaware by hedge fund bondholders over guarantees on the bankrupt unit’s debt, with judgments worth a combined $11.4 billion expected between this month and next.
Goldgar will decide on Wednesday whether to grant the operating unit’s request to halt those lawsuits temporarily.
(Editing by Tom Hals and Matthew Lewis)
