April 5 (Reuters) - The co-founder of Apollo Global Management, Marc Rowan, resigned from the board of Caesars Entertainment Corp’s operating unit after an investigation found that he had led a deal that was undervalued and shortchanged the now-bankrupt unit, court documents showed.
The disclosure was made in court documents filed on Monday in Bankruptcy Court in Chicago. The documents did not say why the billionaire investor resigned.
The bankrupt unit is negotiating a settlement over several deals, including the one led by Rowan, that creditors allege stripped the unit’s best casinos and left behind unsustainable debt. Rowan remains on the board of the parent, which may have to contribute billions of dollars to a restructuring plan to avoid litigation over the deals.
Caesars, which is controlled by Apollo and TPG Capital , has denied these allegations.
According to the documents, Rowan left the operating unit’s board on March 18, three days after the release of an examiner’s report investigating the creditor allegations.
Apollo declined to comment on Rowan’s behalf.
The examiner determined that the operating unit was insolvent at the time of Rowan’s deal and should have received up to $593 million more for the transferred assets.
In Monday’s court papers, the bankrupt operating unit said “it is highly likely” it could win damages stemming from the Rowan deal against its own directors who served in 2013, its parent, Apollo and others.
Rowan joined the operating unit’s board in 2014 and Caesars’ board in 2008, when Apollo and TPG led a $30.7 billion leveraged buyout of Harrah’s.
An independent examiner concluded last month that the operating unit, which filed for bankruptcy protection last year with $18 billion of debt, had up to $5.1 billion in potential claims against its parent and others.
One of the pre-bankruptcy transactions for which the examiner found evidence of a fraudulent transfer was a deal organized by Rowan in 2012 that aimed to inject cash into the distressed operating unit.
It was also meant to protect the $6.3 billion Apollo and TPG had invested in Caesars if the company went bankrupt, the examiner’s report showed.
According to the examiner’s report, Rowan wrote in a 2012 presentation, “A transaction like this is the only way we see it to ‘have our cake and eat it too’.”
The deal created Caesars Growth Partners, controlled by Caesars and its private equity backers, which acquired the Planet Hollywood resort in Las Vegas, a Baltimore casino and half the associated management fees from the operating unit for $360 million. (Reporting by Tracy Rucinski in Chicago and Tom Hals in Wilmington, Delaware; Editing by Toni Reinhold)