Junior hedge fund creditors of Caesars Entertainment Operating Co. have failed in an effort to bar the casino operator from filing its own Chapter 11 petition. Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware in Wilmington on Wednesday, Jan. 14, signed an order denying a stay motion submitted by second-lien bondholders and ruled their venue motion is premature. A group of investors holding second-lien bonds, led by affiliates of Appaloosa Management LP ($13.11 million), Oaktree Capital Management LP ($18.24 million) and Tennenbaum Capital Partners LLC ($9.73 million), on Monday, Jan. 12, filed an involuntary bankruptcy petition for the Caesars Entertaiment Corp. unit. A day later, the group filed a motion requesting the stay of any parallel proceedings. CEOC has said it would file for Chapter 11 between Thursday and Tuesday in Illinois, where it operates a riverboat casino. (Its properties span from Las Vegas to Atlantic City, N.J., in the U.S. as well as several in the U.K. and other international locations.) The petitioning creditors said in a Tuesday court filing that Gross should "issue an order staying any later-filed, parallel Chapter 11 case involving the debtor" pending the court's determination of venue. The creditors argued that "allowing two Chapter 11 cases involving the same debtor and the same debts to proceed simultaneously is both practically untenable and contrary to applicable law." The petitioning creditors then on Wednesday specifically requested the case move forward in Delaware. Additionally, the creditors said that Illinois is not the proper location for the case, as the majority of the Las Vegas company's largest creditors are based in Delaware. CEOC also is incorporated in Delaware. CEOC on Wednesday responded to the motions, reiterating its intent to file its own voluntary petition in the U.S. Bankruptcy Court for the Northern District of Illinois on Thursday. The company maintained the junior creditors are simply attempting to gain leverage in the "imminent voluntary bankruptcy." CEOC also said that it has made no secret of its intent to file for Chapter 11 to implement a restructuring that has the support of more than 80% of senior noteholders. "The motion to stay must be denied; it has no basis in law or fact and flies in the face of public policy," CEOC asserted. The company also argued that the venue dispute is premature, as it has not yet even filed its voluntary petition. "What the court should not do is preemptively stay a voluntary proceeding in the debtors' chosen forum that has been planned for months, deprive a sister court of jurisdiction to decide and grant relief on critical first-day motions, cast a pall of uncertainty over the debtors' business and operations, and disrupt the debtors' efforts to reorganize in a responsible, orderly way," the company said. Still undecided is the petitioning creditors' motion for appointment of an examiner. The group on Monday asserted that "the appointment of a disinterested and impartial examiner is necessary to investigate and report on multiple transactions between the debtor and insiders, most of which occurred during the past 15 months and all of which were consummated during applicable reach-back periods for fraudulent transfers." Those transfers allegedly robbed CEOC of "many billions of dollars of assets and cash," the creditors said. They cited the bankruptcies of Dynegy Inc. and Residential Capital LLC as similar examples of companies that filed for bankruptcy following unfair "insider dealing." A hearing on the examiner request had not been set as of Wednesday afternoon. In a preliminary statement, the second-lien bondholders blamed the involuntary filing on factors such as CEOC's skipped $225 million debt service payment to holders of second-lien bonds due 2018, which was due on Dec. 15. Those notes due 2018 represent $4.5 billion in principal. The bondholders slammed what they call a "willful and deliberate" missed payment that transpired not due to an immediate liquidity shortfall but "as part of an agreement with first-lien lenders that would permanently deprive holders of second-lien notes not only of payment of the overdue interest but also most of their principal." Furthermore, the statement accused CEOC of failing to conduct its financial affairs in good faith and generally failing to pay its debts as they come due. The second-lien bondholders also disputed CEOC's claims that it is protected by a 30-day grace period following the missed payment, arguing there is actually no grace period in place — a circumstance that would knock down one barrier to the creditors' right to put CEOC in involuntary bankruptcy. Under CEOC's plan, second-lien noteholders owed $5.2 billion would receive a pro rata share of a 17.5% to 30.1% equity interest in a newly formed property company. That the second-lien bondholders beat CEOC to the bankruptcy filing punch is significant because CEOC granted its first-lien lenders a lien on its cash on Oct. 15, and it has a 90-day window — closing Thursday — during which it can't enter Chapter 11 without risking that a court would undo the lien, classifying it as a preferential transfer. That's why CEOC set a Thursday to Tuesday filing window. CEOC's restructuring support agreement with first-lien bondholders took effect Jan. 9 after more than 60% of the creditors pledged their support for the plan and a creditor group's purchase of an additional $500 million in first-lien bonds promised to push the group over the 66% dollar volume threshold required in bankruptcy court for class acceptance. The group is set to receive a mix of cash, new first- and second-lien debt and a majority of equity in the restructuring. An informal group of bank lenders holding more than 50% of first-lien bank debt, meanwhile, announced Monday it would not support the restructuring in its current form, aligning them with the second-lien bondholders against CEOC. The bank group would receive a mix of cash and new first- and second-lien debt under the restructuring. A Caesars Entertainment spokesman previously called the junior creditors' claims "meritless." The company had not formally responded to the involuntary filing. Under the federal Bankruptcy Code, a company has 21 days to contest an involuntary petition. A Jones Day team including Bruce Bennett, James O. Johnston, Sidney P. Levinson, Joshua M. Mester and Monika S. Wiener and a Young Conaway Stargatt & Taylor LLP team in Wilmington headed by Robert S. Brady, Edmon L. Morton and Robert F. Poppiti Jr. represent the second-lien bondholders. Bennett and Brady couldn't immediately be reached for comment. A Kirkland & Ellis LLP team that includes Paul Basta and James H.M. Sprayregen is supplying legal counsel to CEOC. Basta couldn't be reached for comment Wednesday. Domenic E. Pacitti and Morton Branzburg of Klehr Harrison Harvey Branzburg LLP also represent the casino operator. Caesars Entertainment's financial adviser is Blackstone Group LP. Alan W. Kornberg and Jeffrey D. Saferstein of Paul, Weiss, Rifkind, Wharton & Garrison LLP are providing legal counsel Stroock & Stroock & Lavan LLP and Rothschild are advising the first-lien bank lenders. — Lisa Allen contributed to this report. Read more from:
Click to view a price quote on CZR. Click to research the Leisure industry.
from Latest TSC Headlines http://ift.tt/157ncD7
No comments:
Post a Comment