Elliott Seeks Earlier Chapter 11 Bankruptcy for Caesars Entertainment

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Elliott Seeks Earlier Chapter 11 Bankruptcy for Caesars Entertainment
By World Economic Forum (Flickr: The Global Financial Context: Paul Singer) [CC BY-SA 2.0], via Wikimedia Commons

Elliott Management, the activist hedge fund managed by Paul Singer is seeking an earlier chapter 11 bankruptcy for Caesars Entertainment Corp (NASDAQ:CZR) through a lawsuit.

Elliott owns a huge credit-default position in a subsidiary of Caesars Entertainment Corp (NASDAQ:CZR), which is owned by Apollo Global Management and TPG Capital.

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Elliott accused Caesars of undertaking an “epic and fraudulent scheme”

The New York Post reported that Elliott was behind the lawsuit against Caesars Entertainment Corp (NASDAQ:CZR) filed by UMB Bank, a trustee for a set of senior secured notes almost entirely owned by the activist hedge fund.

The lawsuit accused Caesars Entertainment Corp (NASDAQ:CZR) of undertaking an “epic and fraudulent scheme” to sell its assets on discount to two related divisions. Elliott called it a $4 billion “outright looting” plan.

Elliott through its trustee asked the judge in a Delaware court to put Caesars Entertainment Corp (NASDAQ:CZR) under chapter 11 bankruptcy now to prevent the company’s management from “outright looting” of its assets.

The report indicated that Caesars Entertainment Corp (NASDAQ:CZR) plans to file for chapter 11 bankruptcy on January next year, which appeared too late for Elliott.

Market observers suggested that Elliott will make a huge profit if the company enters a chapter 11 bankruptcy before December 19, the expiration date of its credit-default position.  An earlier filing will allow Elliott to cash in on its bond and CDS investments in the company.

Other senior bond holders are willing to wait for Caesars Entertainment Corp (NASDAQ:CZR) to file for bankruptcy early next year. Until then, the company will not be able to move $1.6 billion in cash to the balance sheet of its subsidiary and into the hands of bond holders.

Caesars Entertainment Corp (NASDAQ:CZR) said the lawsuit “is an attempt to derail constructive talks the company is having with creditors regarding a restructuring of the company.”

In August, Bloomberg reported that the company filed a case against 30 bondholders for allegedly attempting to obstruct its restructuring with “disruptive appearances before gaming regulators” and “a baseless default notice.” Caesars is trying to restructure $12.7 billion in debt.

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