* Creditors want to free up a $468 million payment from Oct. 2014
* Creditors must prove Caesars was not paying debts
* Judge to rule on whether creditors’ lawsuits can proceed
By Tracy Rucinski
CHICAGO, Oct 2 (Reuters) - Creditors of Caesars Entertainment Corp’s casino business are heading to court on Monday to argue that the company has been bankrupt for three days longer than it acknowledges, and $468 million hangs on the outcome.
The battle stems from how the casino operator wound up in bankruptcy in the first place. Creditors hope to convince U.S. Bankruptcy Judge Benjamin Goldgar in Chicago that the process began on Jan. 12 in Delaware.
That was the day that Appaloosa and two other hedge funds filed an involuntary bankruptcy petition against the company. Three days later, the operating unit of Caesars, which was formed by the 2008 buyout of Harrah’s Entertainment, filed its own Chapter 11 in Chicago, and the Delaware judge transferred his case to Goldgar.
The law allows creditors to attack certain transactions dated within 90 days before a bankruptcy filing so they can claw back cash.
If the judge considers the Jan. 12 bankruptcy date valid, unsecured creditors could challenge an October deal granting Caesars’ senior creditors a lien on $468 million in cash.
If Caesars wins and Goldgar says the bankruptcy started Jan. 15, that October deal, which is a major part of the faltering restructuring, would be more difficult to challenge.
To win their case, the unsecured creditors must prove that they were justified in filing an involuntary petition against Caesars operating unit.
“It is the burden of the petitioning creditors to show that the alleged debtor was not paying its debts as they become due,” said retired U.S. Bankruptcy Judge Bruce Markell, who teaches law at Northwestern University. “There’s no crisp line on what percentage of unpaid debts would be considered insolvent.”
The dispute is one of many Caesars faces in its $18 billion bankruptcy case.
In a potentially bigger ruling, an Illinois judge is due to decide whether creditors’ lawsuits against the parent company in New York and Delaware should be stayed, overturning Goldgar’s decision in July to let the litigation proceed.
The casino operator’s private equity owners, Apollo Global Management and TPG Capital Management, have been accused of illegally transferring the best properties out of creditors’ reach before the bankruptcy filing.
The bankruptcy is In re Caesars Entertainment Operating Co Inc, U.S. Bankruptcy Court, Northern District of Illinois, No. 15-1145. (Reporting by Tracy Rucinski in Chicago; Editing by Tom Hals and Lisa Von Ahn)