Fail, Caesar! An Update

It’s been just over a year since Caesars Entertainment Operating Company (CEOC) declared bankruptcy. If Caesars Management was hoping that the court-appointed examiner would be giving them good news, and that the company would be coming out of bankruptcy unscathed, well, the news of the day is anything but.

Yesterday’s Wall Street Journal noted that a reorganization is not a given. Judge Benjamin Goldgar noted,

It doesn’t have to end with a confirmed plan…A trustee could be appointed, the case could be dismissed or, my favorite, the case could be converted to chapter 7 [liquidation], which would just be a hoot, wouldn’t it?

It’s likely the temperature in Caesars’ boardroom dropped ten degrees when they heard about that. As to why the judge made the remark, it turns out that Caesars doesn’t want the examiner’s report made public. Now why is that, as examiner’s reports (in a bankruptcy) are normally made public? Could it be that there’s damaging information in the report?

If we are to believe a report in the New York Post that’s exactly why. “Court-appointed probe will slam Caesars for fraud,” screams the headline. The first two paragraphs tell the story:

Caesars Entertainment’s court-appointed examiner has told company officials and creditors’ lawyers he believes the company acted improperly when it transferred assets away from the hobbled casino prior to putting it into Chapter 11, The Post has learned.

A report by the examiner, expected to be released next month, is likely to conclude there was a degree of civil fraud connected to the transfer, three sources with direct knowledge of the talks said.

Ouch.

As to what this means, quite a bit, and none of it is good for Caesars’ plan to get out of bankruptcy:

  • The transfers made just before the bankruptcy (allegedly moving Caesars’ best assets out of CEOC prior to the bankruptcy) could be undone, dragging more of Caesars into bankruptcy;
  • There could be personal liability for members of the Board of Directors of Caesars; and
  • Asset sales and a very different exit for Caesars from bankruptcy would become far more likely.

For my poker-playing readers, it’s still unlikely that this will have a direct impact on this year’s World Series of Poker. It’s in everyone’s interest that the WSOP operate as planned because it’s profitable. That said, I would not be surprised to find assets such as the WSOP owned by someone besides Caesars by the end of the year.

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