Fearing they may be frozen out a group of lower ranking creditors have sued senior lenders of Caesars Entertainment Operating Co., further complicating an already labyrinthine maze of litigation in Caesar’s plan to reorganize under bankruptcy protection.
The group will benefit if some repayment guarantees are taken away from senior lenders by an official committee of unsecured creditors. The lawsuit filed by the committee on August 7th claims that collateral pledges which back billions in senior notes and loans are imperfect and should be thrown out.
Caesars filed for bankruptcy in January listing debts of more than $18 billion and assets of about $12 billion. Under their proposed plan, Caesars’ parent company would keep all of its assets along with a stake in the operating unit. Caesars has attempted to convince lower ranking creditors and bank lenders to agree to the reorganization plan that senior lenders have signed off on.
Mid-tier creditors holding second lien notes have sued the parent company to force Caesars to reverse restructuring moves the company made before the bankruptcy filing. In a nutshell their claims assert that the parent company looted the operating company of various valuable assets, transferring them into the parent company at lower than market value. The suit by mid-tier creditors could force the parent company to file for bankruptcy as well.
Friday’s lawsuit is aimed at trustees that represent senior and mid-tier holders of Caesars’ notes.