Caesars Entertainment won an important round in a courtroom battle that has the potential to put the parent company in bankruptcy as it pushes to complete the re-organization of its bankrupt Caesars Operating Company subsidiary.
A Chicago appeals court sent the issue back to the bankruptcy judge, ruling that the lower court used faulty reasoning when it declared that actions filed by debt holders in New York could proceed, according to a Reuters report.
Creditors sued the Caesars parent, claiming it violated federal law when, without unanimous bondholder approval, it abandoned a pledge to help the operating unit repay $7 billion in debts. The operating unit filed for bankruptcy about five months later. Should Caesars lose the suits, which are all before the same New York judge, it could be forced into bankruptcy, too.
The operating unit asked the Chicago judge overseeing its bankruptcy to halt the lawsuits, arguing a suspension was justified because the threat to the parent would also hurt the chances that the operating unit could reorganize. Normally, only a bankrupt company is entitled to such protection, not non- bankrupt affiliates.
The appeals court sent the case back to the lower court, saying U.S. Bankruptcy Judge A. Benjamin Goldgar should first determine whether the lawsuits could have a negative impact on the bankruptcy.
Phil Hevener has been writing about the Nevada gaming business for more than 30 years. Email: [email protected].