The $18 billion bankruptcy dispute between Caesars Entertainment Operating Company Incorporated and its creditors took another complex turn on Friday after the mediator tasked with resolving the issue resigned with no immediate successor yet identified.
According to a report from the Reuters news service, Caesars Entertainment Operating Company Incorporated filed for bankruptcy in January of 2015 amid creditor accusations that parent Caesars Entertainment Corporation and private equity sponsors Apollo Global Management and TPG Capital had stripped the operating arm of its best assets.
Amid a raft of subsequent finger pointing, March saw retired federal judge Joseph Farnan tasked with helping the feuding parties to reach a settlement so that Caesars Entertainment Operating Company Incorporated could be lifted out of bankruptcy.
“I’m convinced that I can’t continue and possibly a new mediator will be able to establish a workable process,” read a letter from Farnan published as part of a filing with the United States bankruptcy court in Chicago.
Farnan reportedly wrote that his resignation was not the fault of those involved in the case although he did cite the “atypical views” on mediation of United States Bankruptcy Judge Benjamin Goldgar, who is overseeing the case in Chicago. In a ruling last month that unshielded Caesars Entertainment Corporation from lawsuits connected with the bankruptcy, Goldgar allegedly cast doubt over the effectiveness of mediation despite a filing from Farnan citing progress. Caesars Entertainment Operating Company Incorporated subsequently appealed the decision with Goldgar suggesting that Farnan should testify in court on the progress of the mediation.
Citing confidentiality concerns, Farnan reportedly wrote that Goldgar “either misspoke or doesn’t understand how such disclosures would be viewed by participants and the markets”.
Reuters reported that the heart of the dispute is how much Caesars Entertainment Corporation, Apollo Global Management and TPG Capital should be required to contribute to the reorganization of Caesars Entertainment Operating Company Incorporated in exchange for releases from creditors’ claims.
In a recent court filing, Apollo Global Management directors Marc Rowan and David Sambur declared that they had offered in mediation to pay $250 million to settle with junior creditors. But, no deal was forthcoming as creditors appear to be seeking several times this amount.
The pair complained that they were being “harassed” by creditors demanding “a staggering array” of evidence on their personal financial affairs all the way down to the “receipts and instruction manuals for their children’s toys”.
For its part, Caesars Entertainment Corporation has offered to hand over $4 billion for the unit’s reorganization, although junior creditors reportedly allege that they have claims worth some $12.6 billion.