Report due in days could break deadlock on Caesars bankruptcy

Fri Mar 4, 2016 5:43pm EST
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By Tracy Rucinski

CHICAGO (Reuters) - A former Watergate prosecutor is due to release a report on a court-ordered fraud investigation into a series of corporate deals involving Caesars Entertainment Corp that could break a deadlock in one of the biggest fights on Wall Street over the bankruptcy of Caesars’ casino operating unit, Caesars Entertainment Operating Co Inc.

Richard Davis and a team of lawyers and advisers have spent a year trying to determine if Caesars fairly tried to rescue CEOC, or stripped away the best properties and left it with faded regional casinos and a crushing $18 billion of debt.

The examiner said in a court filing that the report would be filed under seal the week of March 7 with an outside date of March 14, along with a public summary of Davis' findings. The full report will be made public in the weeks following the initial, redacted release.

The Chapter 11 proceedings have pitted aggressive players in finance against each other. Caesars and its private equity sponsors, Apollo Global Management and TPG Capital [TPG.UL], have teamed up with Elliott Management. Bondholders are being led by Appaloosa Management.

Caesars has proposed injecting $1.5 billion into its operating unit to settle allegations of asset-stripping, and the examiner's report could show whether or not that amount is fair.

But so far junior bondholders have refused to accept Caesars' plan, demanding that it inject more money into the bankrupt casino company which would be split into a real estate investment trust and a separate operating unit.

"The examiner's report is not binding but it can be used as a roadmap for how to proceed," said Jonathan Lipson, a professor at Temple University School of Law in Philadelphia.

In a best-case scenario for Caesars, formed by the 2008 buyout of Harrah's Entertainment for $31 billion, Davis will say that most of the transactions were fairly valued.   Continued...