(Rewrites throughout with Caesars lawsuit against noteholders)
By Tom Hals
Aug 5 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
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
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
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
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.
(Reporting by Tom Hals in Wilmington, Delaware; Editing by