When last we left the bankruptcy of Caesars Entertainment Operating Company (CEOC) (nearly four months ago), a complete reorganization wasn’t ruled out but Caesars was still in control of the bankruptcy. Over the last four months:
- In mid-March, a bankruptcy investigator reported that Caesars management deliberately hurt CEOC through its transactions prior to bankruptcy. This is what junior creditors claimed both to the bankruptcy court and various lawsuits. Bankruptcy investigator Richard J Davis wrote,
The principal question being investigated was whether in structuring and implementing these transactions assets were removed from CEOC to the detriment of CEOC and its creditors.
The simple answer to this question is “yes.” As a result, claims of varying strength arise out of these transactions for constructive fraudulent transfers, actual fraudulent transfers (based on intent to hinder or delay creditors) and breaches of fiduciary duty by CEOC directors and officers and CEC. Aiding and abetting breach of fiduciary duty claims, again of varying strength, exist against the Sponsors and certain of CEC’s directors. None of these claims involve criminal or common law fraud.
- Marc Rowan, of Apollo Global Management, resigned from the board of directors of Caesars three days after that investigative report was released.
- From Fortune comes the report that an extramarital affair by a restructuring advisor working for CEOC cost Caesars a team of key advisors. Melissa Knoll had been hired by Caesar to probe the allegations noted above. “She was sleeping with the enemy,” bankruptcy judge Benjamin Goldgar said. “Because the investigation is tainted in this way, there isn’t any point in pursuing it.”
- On May 2nd Judge Goldgar gave Caesars’ creditors another two weeks to agree or disagree with Caesars’ restructuring plan. Creditors are waiting for details that were supposed to have been provided to them by April 22nd; Judge Goldgar ordered that the information be released by last Saturday, May 7th. The next hearing is set for May 25th.
- On May 6th Caesars announced that it hired former federal bankruptcy judge Robert Gerber as “Chief Restructuring Officer” and warned that it could be forced into bankruptcy.
- Caesars has reportedly received multiple unsolicited offers for its interactive gaming unit. This unit, Caesars Interactive Entertainment, offers interactive games on Facebook; it also owns the World Series of Poker. The bids are supposedly in the $4 billion range. Do note that this unit is one of those that creditors claim was transferred at less than fair market value from CEOC, so a sale would likely get tied up in court.
I am not an attorney, so my speculation is just that: speculation. That said, Caesars’ goal of creating a bad Caesars and a good Caesars and having just the bad Caesars go through Chapter 11 doesn’t look like a good bet to succeed.