Caesars Entertainment, creditors trade lawsuits

Gary Loveman, president, CEO and chairman of Caesars Entertainment, delivers a keynote address during the Global Gaming Expo (G2E) at the Las Vegas Convention Center Wednesday, November 17, 2010.

Caesars Entertainment’s ongoing financial troubles escalated this week with two lawsuits, one from the casino company alleging that some creditors are trying to force a default and another from creditors alleging Caesars transferred assets fraudulently.

The first lawsuit was filed Monday by Wilmington Savings Fund Society, a representative of some Caesars creditors, in Delaware’s Court of Chancery. It claims that Caesars’ operating company improperly transferred some of its assets beyond the reach of creditors, according to Reuters.

Caesars has said the moves were necessary to prepare its operating company for a stock listing.

The second lawsuit was filed today by Caesars and the operating company in New York Supreme Court. The suit names more than 30 defendants and says they “publicly, falsely, and maliciously” claimed that Caesars violated its fiduciary responsibilities.

More specifically, the suit says the defendants wronged Caesars through demand letters, “disruptive appearances before gaming regulators,” the press, a “baseless default notice” and “meritless” misconduct allegations.

“We refuse to be held hostage by speculators who appear to be betting against the long-term health of our enterprise as well as our more than 60,000 employees and the communities in which we operate,” Caesars CEO Gary Loveman said in a statement. “The meritless actions taken by the defendants impede our ability to conduct rational negotiations with holders to further improve (the operating company’s) financial condition.”

Caesars is saddled with more than $20 billion in debt and has taken steps to restructure some of that burden, including transferring assets to subsidiaries. In March, the company announced it would sell Bally’s Las Vegas and other properties to a Caesars affiliate as part of debt restructuring efforts.

The Wilmington Savings lawsuit said that Caesars executives “have made clear they have no intention of preserving the value” of the company “or otherwise protecting the interests of creditors,” Bloomberg reported.

The Caesars lawsuit specifically calls out defendant Elliott Management Corp., which it says has “the greatest ulterior motive” in seeing that the operating company “defaults rather than survives and thrives.” Elliott stands to gain if it can convince the market that the operating company will default, or if a default actually happens, the lawsuit says.

Elliott did not immediately return a request for comment.

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