Caesars Entertainment Operating Company (CEOC) has been sued for more than $6 billion (€5.3 billion) by a representative of noteholders that are the lone creditors backing the US operator’s plan to restructure its crippling debt.
As reported by iGaming Business, Caesars Entertainment Group (CEC) in December entered into a definitive agreement to merge with equity investment firm Caesars Acquisition Company (CACQ) in an effort to solve its debt crisis.
CEC previously confirmed that its level of debt amounts to approximately $18.4 billion.
The company, in January, gained further support from bondholders over the proposed plans, before the Caesars Entertainment Operating Company (CEOC) filed for Chapter 11 bankruptcy protection as part of the restructuring process.
However, the operator has now been dealt a blow after it was confirmed that a lawsuit had been filed in Manhattan federal court, seeking damages equal to the outstanding principal and interest on over $6 billion in first-lien notes issued by Caesars’ operating unit.
According to Reuters, the lawsuit has been issued by UMB Bank, the indenture trustee for a number of issuances of first-lien notes, rather than the noteholders.
UMB claims Caesars breached terms of the notes and the US Trust Indenture Act by voiding a guarantee of the operating unit’s obligations.
The news comes at a time when Caesars is already defending a number of lawsuits accusing the firm of improperly benefiting from the transfer of the best casinos out of its operating arm in recent years, leaving it in a position where it cannot pay its debts.
The lawsuits claim Caesars’ private equity backers Apollo Global Management and TPG Capital Management have also benefited from such transfers, with a court-ordered examiner having been appointed to investigate the case.
Responding to the latest lawsuit, Caesars said: “CEOC has acknowledged to the holders of first lien notes who are party to its Restructuring Support Agreement (RSA) that UMB Bank is not a party to the RSA and, therefore, the filing of the lawsuit by UMB Bank does not terminate the RSA, which remains in effect.
“CEOC has been advised by the RSA parties that UMB Bank is acting independently as a fiduciary and not at the direction of the noteholders that are party to the RSA.
“CEOC is currently seeking an injunction in the Chicago Bankruptcy Court to stay litigation commenced by other CEOC creditors who contend that CEC is obligated to guarantee CEOC’s debt.
“UMB Bank has agreed that it will be bound by the bankruptcy court’s decision to the same extent as if CEOC had requested injunctive relief with respect to the UMB lawsuit.”
Meanwhile, the firm’s Caesars Interactive Entertainment arm has been issued with a fine of $15,000 by the New Jersey Division of Gaming Enforcement (NJDGE) for soliciting people who signed up to a self-exclusion list to prevent them from gambling in the state.
The NJDGE confirmed this week that the local Caesars Interactive Entertainment New Jersey arm allowed five self-excluded gamblers to place bets online, while others were permitted to create internet betting accounts.
Caesars Interactive is also said to have violated New Jersey gambling regulations by distributing promotional material to 231 people who had signed up to a self-exclusion list.
Caesars Interactive was last year issued with a $10,000 fine by the NJDGE for a similar incident when it emailed promotional material to more than 250 self-excluded gamblers in the state.
source : www.igamingbusiness.com