Caesars wins big

Ruling earlier than expected, U.S. Bankruptcy Court Judge Kevin Gross handed Caesars Entertainment a massive, possibly decisive victory in its bankruptcy fight, transferring the case from Wilmington to Chicago. Gross ruled that Caesars, despite some behavior that “on its face is suspect,” was entitled to “just enough deference” to choose its own battleground, “even though the decision may have been made to favor third parties and insiders” to choose the ground on which it would fight. He added that he felt the Chicago court would apply sufficiently stringent scrutiny to “serious allegations that the debtors’ controlling equity holders, Apollo Capital Group and TPG Capital, engaged in a series of self-dealing transactions.”

Gross said the dissident creditors “raced to the courthouse” and that “rewarding the petitioning creditors would be bad precedent … Ultimately, the overriding consideration is that the debtors chose the Illinois court … ” The case now moves to the bench of Judge A. Benjamin Goldgar. However, Gross isn’t out of the picture just yet. He has to rule on whether the Jan. 15 filing date chosen by Caesars will stand, making it easier for the company to slip the guarantees for which the plaintiffs are fighting. Caesars says the latter are trying to undermine a pre-bankruptcy accord with its senior creditors and it’s doubtful the junior noteholders would disagree.

“It would be bad: bad for debtors, bad for creditors and bad for this court. It would transfer the venue choice, which the law gives to the debtor, to unhappy creditors,” said Caesars attorney David Zott. For his part, Gross said companies in financial distress might be inhibited from negotiating with creditors for fear of being hit with an involuntary bankruptcy suit.

“The Midwest is an important hub of CEOC’s operations and we look forward to implementing our comprehensive financial restructuring plan in the Bankruptcy Court for the Northern District of Illinois in Chicago,” said Caesars spokesman Stephen Cohen. It will also expedite Caesars’ plans to bifurcate Caesars Entertainment Operating Co. into a REIT, a key component of its reorganization plan. It seems a moot point now that the senior creditors will be made nearly or completely whole, leaving the junior ones with just enough money to buy a round of crying towels.