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Junior creditors of Caesars Entertainment launched a fresh attack against a top U.S. restructuring attorney, alleging that he misled a judge and asking that the law firm be disqualified from parts of the casino group's bankruptcy case, Reuters reported yesterday. Jones Day, the junior bondholders' law firm, asked the court to reconsider a May order that allowed the bankrupt unit of Caesars Entertainment Corp to hire Kirkland, led by James Sprayregen. The dispute between two of the best-known law firms in corporate restructuring adds another layer of feuding to Caesars' $18 billion bankruptcy, which involves the biggest U.S. private equity and hedge fund firms. In a new court filing on Friday, Jones Day revealed evidence from a board meeting of the operating unit that it says shows testimony by Sprayregen at a trial over Kirkland's hiring by Caesars was incomplete and misleading. Kirkland & Ellis denied the allegation and said that it was without merit. Jones Day initially filed a redacted version of the motion last week, but Bankruptcy Judge Benjamin Goldgar in Chicago rejected that for procedural reasons.

A judge has rejected an unusual attempt by junior bondholders of Caesars Entertainment's bankrupt operating unit to disqualify law firm Kirkland & Ellis from leading the casino group's $18 billion chapter 11 restructuring, Reuters reported yesterday. Jones Day, the junior bondholders' law firm, had asked the court to reconsider a May order that allowed the bankrupt unit of Caesars Entertainment Corp. to hire Kirkland’s James Sprayregen. The fresh motion in the contentious bankruptcy case accused Sprayregen of giving misleading court testimony earlier this year regarding pre-bankruptcy work Kirkland handled for Caesars. Jones said that it unearthed new evidence including minutes from a 2014 board meeting. Jones Day's heavily redacted filing did not disclose the meeting minutes. In his denial to consider the motion at a Nov. 18 hearing, Bankruptcy Judge Benjamin Goldgar said Jones Day should have requested court permission before filing such a restricted document. He said they could ask to refile the motion.

As global economic turmoil pushes more companies to the brink of insolvency, competition is intensifying among distressed-debt investors to safeguard their investments by funding the businesses through bankruptcy, Bloomberg News reported yesterday. In recent months, some of the world’s savviest distressed investors — from Oaktree Capital Management LP to Silver Point Capital LP to Cerberus Capital Management LP — have competed to provide capital to help fund companies during their bankruptcy proceedings through restructuring financing or debtor-in-possession (DIP) loans. And they’re increasingly willing to go to financial extremes to get these deals done. Molycorp Inc. is the latest troubled company to have its creditors battling over DIP debt. Oaktree currently has the senior position in its bankruptcy proceeding with a loan paying 14 percent. But holders of the rare-earths miner’s first-lien bonds, led by JHL Capital Group LLC, are offering a new loan to replace Oaktree’s that would pay just 3 percent. They’re willing to accept such a cheap rate because, in return, they would gain more control of the company as it pursues an asset sale. Read more. 

Take an in-depth look at issues related to debtor-in-possession financing with ABI’s Debtor-in-Possession Financing: Funding a Chapter 11 Case. 

Junior bondholders in the Caesars Entertainment casino bankruptcy accused restructuring attorneys of allegedly misleading a judge and said that they should be disqualified from handling parts of the case, Reuters reported yesterday. The allegation adds to the bitterness of the $18 billion bankruptcy, which has pitted the private-equity owners of Caesars Entertainment Corp. against the junior creditors of the company's operating unit. In a Wednesday court filing, junior creditors said that they had unearthed evidence that they said showed that attorneys with Kirkland & Ellis, which represents the bankrupt operating unit CEOC, misled the court about potential conflicts. The junior creditors are represented by a team of lawyers from Jones Day, and they asked Bankruptcy Judge Benjamin Goldgar to address the matter at a hearing on Nov. 18. Judge Goldgar has already approved the hiring of Kirkland over a previous objection by junior creditors. Goldgar could decline to revisit the issue, or consider the request to disqualify some of Kirkland's retention.

Prosecutors spent four months trying to prove three former executives of collapsed law firm Dewey & LeBoeuf LLP were guilty of more than 150 counts in a financial fraud scheme, but in the jury room, it proved to be too much to handle, the Wall Street Journal reported today. The mistrial this week in the closely watched case is the latest example of the hurdles that prosecutors face when bringing complex financial cases to a jury. Prosecutors and enforcement officials have been criticized for failing to charge individuals with wrongdoing in the wake of the financial crisis, often opting for large monetary settlements instead. But such cases can be highly complex and carry long odds of getting past juries with scant financial backgrounds. Prosecutors from the office of Manhattan District Attorney Cyrus Vance Jr. sought to prove that Dewey’s top three leaders masked the troubled nature of the firm’s finances ahead of its 2012 collapse. During the trial, they called 41 witnesses and displayed hundreds of emails to detail the often arcane accounting adjustments they claimed underpinned the alleged scheme.

A Manhattan jury yesterday acquitted three former executives of bankrupt law firm Dewey & LeBoeuf of several criminal charges but remained deadlocked on most of the charges, including the most serious, grand larceny, Reuters reported yesterday. Former Dewey Chairman Steven Davis and former Executive Director Stephen DiCarmine were each found not guilty of four counts of falsifying business records, while former Chief Financial Officer Joel Sanders was found not guilty on one such charge. All three men were acquitted of numerous other false business records counts last week, when the jury also said that it was deadlocked on most of the counts. But scores of falsified business records remain against the defendants, as do all of the most serious counts. Each defendant faces 15 counts of grand larceny, which carries a maximum sentence of 25 years in prison. In addition, they each face charges of scheming to defraud and violating New York's securities fraud law, the Martin Act.

Recent retail bankruptcy cases speak to the debate underway about proposed changes to bankruptcy laws that would make the process cheaper for and potentially more favorable to businesses trying to reorganize, according to a commentary yesterday by Prof. Stephen J. Lubben in the New York Times DealBook blog. In response to the recommendations of ABI's Chapter 11 Reform Commission, the Loan Syndications and Trading Association recently released a report in response focused on the importance of preserving chapter 11 in its current form. ABI's Chapter 11 Reform Commission instead portrays its proposed changes as restoring the balance of power in chapter 11. Read more. 

To read more or to watch presentations on the Commission's the recommendations to modernize chapter 11, be sure to visit http://commission.abi.org/.