U.S. District Judge Shira A. Scheindlin yesterday said that Caesars Entertainment Corp. and a group of bondholders should prepare for a trial in a lawsuit over Caesars’ guarantees of billions of dollars of its operating unit’s debt, the Wall Street Journal reported today. Judge Scheindlin said that a dispute exists as to whether a series of asset-shuffling deals last year constituted an out-of-court debt reorganization that harmed the holders of more than $6 billion in bond debt issued by Caesars Entertainment Operating Co. Bondholder trustees BOKF NA and UMB Bank NA had asked the judge to rule on a discrete issue in the litigation: whether the alleged release of Caesars’ guarantees of its subsidiary’s debt violated the Trust Indenture Act of 1939, legislation created to protect bondholders. The bondholders had sought the ruling as part of their broader effort to force Caesars to honor the guarantees. Caesars disputes that it is on the hook and has warned that a ruling otherwise would likely cause it to follow the unit into chapter 11 protection.
