Junior creditors of Caesars Entertainment filed court papers today seeking to prevent the debt-ridden casino company’s financial restructuring plan from taking effect.
In documents filed with the U.S. Bankruptcy Court in Delaware, the junior creditors are attempting to force Caesars’ operating subsidiary into bankruptcy before the company files later this month. The creditors claim that the restructuring plan is unfair to them and that the subsidiary is “generally not paying its debts as they become due.”
Last week, Caesars said it reached a critical level of creditor support for its plan to slash the operating subsidiary’s $18.4 billion debt by nearly $10 billion. Under the plan, which Caesars and senior creditors agreed to last month, the subsidiary would be transformed into one component that operates casinos and another that owns them.
The junior creditors criticized Caesars’ decision to skip a $225 million interest payment on Dec. 15., when it was still negotiating the restructuring plan with senior creditors.
Additionally, the junior creditors say Caesars has put valuable assets out of reach.
“The Petitioning Creditors filed this involuntary bankruptcy case on the heels of a series of suspicious transactions in which insiders plundered many billions of dollars of value from the Debtor,” attorneys for the junior creditors wrote. “There is no question that the legitimacy of the transactions will be the single most important issue in this case.”
The court documents say Caesars transferred a luxury tower at Caesars Palace and the Linq promenade to an affiliate for an “unreasonably low sum” of $600 million. Similarly, the papers say, Caesars transferred four valuable properties — including the Cromwell and Bally’s Las Vegas — to an affiliate for an “unreasonably low price” of $2 billion.
Creditors requested the appointment of an independent examiner to investigate their claims.
In a statement, Caesars characterized the junior creditors’ claims as “meritless” and promised to move forward with plans to restructure the subsidiary, Caesars Entertainment Operating Company or CEOC.
“The involuntary petition is a transparent attempt to thwart a restructuring that has been agreed to by more than two-thirds of CEOC’s first-lien noteholders,” the statement said. “The action is designed to injure CEOC while these junior creditors attempt to boost their standing.”
The statement promised a formal response to the creditors’ “baseless position” soon and said business will continue uninterrupted.
CEOC owns Caesars Palace and manages other properties on the Strip, including the Flamingo, Paris and Planet Hollywood. It owns or manages many more Caesars properties in other locations.
Shares of Caesars were down 4.19 percent on the Nasdaq today.