Appaloosa Investment and other junior creditors of Caesars Entertainment. undertook a new legal maneuver to try and force the main operating unit of the casino and hotel operator into bankruptcy on Monday. The goal is to block the company’s current bankruptcy plan to protect senior lenders at their expense, and comes after months of bitter arguments over Caesars future.
David Tepper’s Appaloosa and fellow creditor‘s involuntary Chapter 11 filing is aimed at pre-empting Caesars’ own efforts to put the unit under bankruptcy court protection and block a recent deal between the company and senior creditors. Appaloosa petitioned the bankruptcy judge to appoint an examiner to investigate claims that Caesars insiders “plundered” the unit, giving themselves hundreds of millions of dollars while illegally transferring assets out of the company.
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Statement from Appaloosa
“These insider transactions stripped the debtor of most of its valuable income-generating assets and hundreds of millions of dollars of cash, leaving the debtor burdened with massive debt that cannot be repaid,” Appaloosa and company claimed in court documents filed in Delaware today.
The creditors also claimed the plan by Caesars insiders was to create a “good Caesars” with low debt and profitable assets and a “bad Caesars” with high debt and less valuable assets, according to the lawsuit filed by a trustee for the second-lien creditors. If the “bad Caesars” failed, the “good Caesars” would still be protected.
Statement from Caesars
The Casino owner blasted the lawsuit as merit-less and self-serving. “The claims are a transparent attempt to thwart a restructuring that has been agreed to by more than two-thirds of CEOC’s first-lien noteholders,” Caesars noted in a statement replying to the court filings from Appaloosa and the other creditors. “The action is designed to injure CEOC while these junior creditors attempt to boost their standing.”
The statement continued to say that the involuntary bankruptcy petition would not impact Caesars’ ongoing operations.
The high profile case has pitted Paul Singer against Leon Black.