It has been almost two years now since Caesars started an organizational master plan that would see it and its new establishment CEOC bring to an end bankruptcy claims. However, this seems to be a hard thing to achieve for Caesars following the watchdog’s involvement in the case.
After 23 months of legal battle, almost all of CEOC’s creditors agreed that the reorganization plan would be given a chance. However, the U.S. Trustee, a body whose mandate is to oversee bankruptcy claims, objected the plan when it issued an official objection statement this week.
With this particular bankruptcy case, the problem is that it will offer blanket immunity to Apollo and TPG.
It should be remembered that in 2008, when the industry was hit hard by the recession, TPG and Apollo projected nearly $30.1 billion, which they used to form Caesars. This move left it with an $18 billion debt.
In an outright attempt to lower the debt from $18 billion to $10 billion, Caesars decided to seek CEOC’s bankruptcy. This raised eyebrows amongst junior bondholders who believed that the deal would go sour. Because of that, many of the creditors sued the casino.
After that, the court ordered a probe that was headed by Richard Davies, a Watergate prosecutor. After thoroughly scrutinizing Caesars records that were contained in more than 80 million pages, the team decided that CEOC was, clean thus its prize properties were no longer in question.
However, Davis team found that there was a possible conspiracy by TPG and Apollo back in 2012 when the two launched a strategy that was meant to weaken CEOC. The strategy also had the intent to strengthen TPG and Apollo’s preparations for bankruptcy proceedings.
In the meantime, Caesars has agreed to repay junior creditors $5 billion. This follows last month’s announcement that Caesars be released from asset striping allegations.
An Objection By U.S. Trustee
According to Reuters, on Monday, the U.S. Trustee filed an objection. In part, the objection indicated that quite a number of parties acted far beyond the borders. It also said that it is contrary to Chapter 11 cases.
The Trustee further observed that it was hard to shield a company that has shown traces of actual fraud or has willful misconduct.
The objection filed by the watchdog is spelling trouble to not only TPG and Apollo but also to the entire brand of Caesars. If the brand is found guilty, it will pay heavily. This is likely to affect CEOC’s bankruptcy and even pull the entire group down.
The trial to confirm whether there was bankruptcy or not, has been slated for January 2017.