Caesars Entertainment continues to plow toward a Jan. 20 prepackaged bankruptcy filing, but it’s got a tough row to hoe. For one thing, it must get around the involuntary bankruptcy motion by Appaloosa Management, Oaktree Capital Management and 
Tennenbaum Capital Partners. As Temple University School of Law professor Jonathan Lipson pithily put it, “They want to throw sand in the gears and slow down a prenegotiated plan.” However, the dissenters may have tripped over their own shoelaces by delaying Caesars’ own bankruptcy and giving it more time to sell and reshuffle assets. They’re also bumping up against the automatic stay that is applied to litigation during a Chapter 11.
What’s more, unidentified senior creditors are demanding pre-approval of Caesars’ bankruptcy, which slow those gears a bit more. “Examiners are often frowned upon by the lawyers who restructure companies because their investigations can derail a bankruptcy,” reported Reuters. It continued that Caesars detractors seem to hoping to ape the Dynegy Holdings bankruptcy of 2011, in which a shift of assets comparable to the Caesars Growth Partners one was found to be a fraudulent conveyance.
Leon Black‘s plan to reimburse himself as part of the bankruptcy also appears to be sticking in some craws. Said bankruptcy attorney Chip Bowles, “You can’t just pay creditors you like to help you. You have to be fair and equitable to everyone with skin in the game.” That
Caesars has definitely not done, bending over backwards for senior creditors — including offering what are described “special fees and payments” — while mostly sticking it to the junior bondholders.
Fitch Ratings analyst Alex Bumazhny opines that a debt swap still won’t be that attractive, considering the interest payments and leases that Caesars will be carrying. However, Black prevailed against junior creditors in a similar impasse involving another of his busted investments, silicon maker Momentive Performance. Still, Black must persuade the court that his plan is fair to all parties.
However, Bloomberg News reports that a majority of creditors has now aligned against the Caesars bankruptcy plan — despite the company’s claims of having 67% support. This despite Caesars having dangled a $150 million payment in front of them for taking the guarantees off term loans. (When Caesars removes a loan guarantee, bad things happen.) Law firm Stroock Stroock & Lavan, which is representing the dissidents, isn’t saying who the naysayers are.
Caesars “bondholders could renew their litigation in bankruptcy court once the company files, and ask the judge there to restore the assets to the operating unit. That could tie up the case for months. Those lenders stand to lose much less if they take back the thriving casinos, while Black and [David] Bonderman would forfeit some of their wealth, if forced to do that,” says Bloomberg. Aw, wouldn’t that be a pity?
* A high-ranking Malaysian official’s decision to intervene in a Las Vegas court case has made him a human pin cushion back home. Minister of Home Affairs Ahmad Zahid Hamidi elected to vouch for accused felons Paul and Darren Phua, who are under indictment for running an alleged illegal sports-betting ring out of a Caesars Palace high-
roller villa. Wrote Zahid to Deputy FBI Director Mark Giuliano, “to assist both your department and Mr. Phua’s legal teams, based on our information, Mr. Phua is neither a member nor is he associated with the 14K Triad.” Zahid’s letter was briefly entered in evidence in the Phua case, then withdrawn.
“One Malaysian news organization wrote that police were upset that Zahid appeared to disparage their work,” reports the Las Vegas Review-Journal‘s Jeff German. (Zahid didn’t consult the national police chief before bigfooting the Phua case.) As complaints from Malaysia’s opposition party grew, Zahid and the government have gone silent on l’affaire Phua. The FBI has accused Phua of ties to the 14K Triad and co-defendant Richard Yong (who pled guilty and was kicked out of the U.S.) of also being mobbed up. Aside from poker pro Phil Ivey, who posted the Phua’s bail, there aren’t too many people sticking their necks out for the father-son duo.
