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UPDATE 1-Noteholders and Caesars trade lawsuits over restructuring
August 5, 2014 / 3:30 PM / 3 years ago

UPDATE 1-Noteholders and Caesars trade lawsuits over restructuring

(Rewrites throughout with Caesars lawsuit against noteholders)

By Tom Hals

Aug 5 (Reuters) - Caesars Entertainment Corp and its noteholders traded lawsuits on Tuesday over its restructuring, with creditors saying Caesars was fraudulently transferring assets and the company claiming investors were seeking a default to turn a profit.

Wilmington Savings Fund Society, a noteholder representative, sued overnight in Delaware’s Court of Chancery seeking to unwind recent sales of major Las Vegas properties such as Octavius Tower by Caesars Entertainment Operating Co Inc, or CEOC.

The noteholders said in their lawsuit that billions of dollars of assets were transferred out of CEOC, putting the properties beyond the reach of creditors in what they said was preparation for a default on some of its $25 billion in debt.

Caesars Entertainment has said it was preparing the CEOC unit for a stock market listing, and that the asset transfers to other Caesars’ units allowed CEOC to build a $3 billion cash pile while shedding capital-intensive projects.

Shares of Caesars were down 4.1 percent at $13.47 in morning trade on Nasdaq.

Caesars shot back with its own lawsuit in New York State Supreme Court on Tuesday against many of the biggest funds that specialize in profiting from corporate restructurings.

The gaming company’s lawsuit said the funds made “unfounded threats and bogus allegations” through demand letters, meritless appearances before regulators and by serving the company with what it said was a baseless default notice in June.

“We refuse to be held hostage by speculators who appear to be betting against the long-term health of our enterprise,” said Gary Loveman, the chairman and chief executive of Caesars Entertainment.

The defendants in that lawsuit include affiliates of Appaloosa Management, Centerbridge Partners and Oaktree Capital Management. Caesars took particular aim at Elliott Management, a fund that has been in a long legal battle with Argentina over the country’s 2002 debt default.

“Elliott appears to have the greatest ulterior motive in seeing that CEOC defaults rather than survives and thrives,” said the New York complaint.

The lawsuit said Elliott had a significant stake in a small issuance of senior Caesar notes, while at the same time amassing “an even more significant position” in credit insurance known as CDS covering CEOC. It said that trade breached the indenture governing those senior notes.

The lawsuit said the trade will pay off if Elliott can convince the market a default is imminent. The lawsuit said Elliott sits on the industry committee that determines if an event has occurred that triggers a CDS payment.

Caesars’ lawsuit sought a declaration that it was not in default.

CEOC is responsible for much of the debt taken on when private equity firms Texas Pacific Group and Apollo Management led the 2008 leveraged buyout of Harrah’s Entertainment Inc to create Caesars.

CEOC’s recent moves have included selling properties to a subsidiary of Caesars Entertainment, known as Caesars Entertainment Resort Properties, and to Caesars Growth Partners. The noteholders said Growth Partners was controlled by TPG and Apollo, although it was 58 percent owned by Caesars Entertainment.

The Delaware case is Wilmington Savings Fund Society FSB v Caesars Entertainment Corp et al, Delaware Court of Chancery, No. 10004; The New York case is Caesars Entertainment Operating Co Inc and Caesars Entertainment Corp v Appaloosa Investment Ltd Partnership et al, State Supreme Court of New York, No. 652392/2014 (Reporting by Tom Hals in Wilmington, Delaware; Editing by Grant McCool)

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