A Chicago bankruptcy judge has ruled he won't stop pending lawsuits against Caesars Entertainment Corp. while its debt-heavy subsidiary is in bankruptcy.
Judge Benjamin Goldgar decided Wednesday that the casino giant won't be immune to litigation, unlike its Caesars Entertainment Operation Co. unit, which filed for bankruptcy in mid-January in hopes of shedding $10 billion worth of debt.
Caesars Entertainment Corp. owns and operates 50 casino-hotels in five countries and employs 68,000 people. The company has counted on using its money to bail out its bankrupt subsidiary in a plan pitched to creditors.
It's the company's creditors that have been suing Caesars in the Delaware Court of Chancery and the U.S. District Court for the Southern District of New York, arguing that the company robbed the subsidiary of valuable assets that were transferred to other divisions and removed their guarantees as investors and noteholders in the process.
In the two cases in New York, creditors are seeking more than $7 billion in claims and have sought a summary judgment from the court. A court clerk said Wednesday that no date has been set for the motion to be heard.
Company attorneys have argued that losing the litigation would be dire to the casino company's finances, rendering its plan to contribute some $2.5 billion in funds — although creditors have been skeptical of the amount — to help its subsidiary emerge from bankruptcy moot.
Wednesday's bankruptcy court ruling doesn't spell immediate doom for the casino giant.
The judge in the New York case would still need to rule. If Caesars didn't win the case, the company could appeal.
"We believe our defenses in the New York litigation are strong, and will continue to contest those cases vigorously," said Caesars spokesman Stephen Cohen in an emailed statement after the ruling. "The bankruptcy court's ruling was a technical interpretation of bankruptcy law and did not address in any way the merits of the New York litigation."
In addition, the company announced Monday that it had come to an agreement with its second-lien creditors offering more equity in two new companies and another $200 million worth of convertible notes if the creditors agree to sign-on to its restructuring plan for Caesars Entertainment Operating Co. The company needs more than half of its second-lien debt holders to agree to the plan. By doing so, creditors would agree to drop their claims against Caesars. Second-lien creditors who don't join won't get anything.
Caesars' stock dropped 41 percent to $4.76 a share Wednesday.