Lower-ranking creditors of Caesars Entertainment Operating Co. sued the company’s senior lenders, adding to the web of litigation that is tangling the gambling company’s efforts to reorganize and exit bankruptcy, Bloomberg News reported yesterday. The company’s lowest-ranking bondholders will benefit if the official committee of unsecured creditors succeeds in stripping senior lenders of some of their repayment guarantees. The committee claimed in a lawsuit filed Aug. 7 in Chicago that collateral pledges backing billions of dollars in loans and senior notes are flawed and should be overturned. Since filing for bankruptcy in January, Caesars has been trying to persuade bank lenders and lower-ranking creditors to join senior noteholders that signed a reorganization plan for the Las Vegas-based company. Under that plan, Caesars’ parent company would avoid bankruptcy, keep its assets and maintain a stake in the operating unit. The proposal has split creditors. Caesars and one of its main creditor opponents, which hold middle-tier debt known as second-lien notes, agreed last week to meet. Middle-tier creditors are suing Caesars’ parent, trying to undo restructuring actions it took before the operating company filed bankruptcy. That suit might force the parent into bankruptcy. The new lawsuit by unsecured creditors targets trustees representing Caesars’ senior creditors, including the middle-tier noteholders.
