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The operating unit of Caesars Entertainment Corp, the largest U.S. casino company, filed for chapter 11 protection in Chicago yesterday to cut $10 billion of debt, but a Delaware judge intervened to halt the case before it got started, Reuters reported yesterday. The unusual legal standoff marked the start of a more public phase of complex and contentious debt negotiations. Until now, the company's attempts to cut interest payments after years of red ink have been kept mostly private. Caesars maintains it has the support of its senior noteholders to implement the bankruptcy plan, which would reduce the operating unit's debt to $8.6 billion from $18.4 billion. The bankruptcy was filed overnight yesterday by Caesars Entertainment Operating Company Inc. and 179 affiliates in the U.S. Bankruptcy Court in Chicago. However, junior noteholders, led by the Appaloosa Management hedge fund, filed an involuntary bankruptcy petition against the operating unit on Monday in Delaware. They argued at an emergency hearing in Wilmington yesterday that their case should take precedence and the bankruptcy should proceed in Delaware. Bankruptcy Judge Kevin Gross agreed to put the Chicago proceeding on hold, but said that he would allow routine "first-day" requests, such as those that would enable employees to be paid. Judge Gross asked what agreements he might be disrupting by issuing a stay and taking time to sort out which court would handle the case.

The operating unit of Caesars Entertainment Corp, the largest U.S. casino company, filed for chapter 11 protection to implement its plan to cut $10 billion of debt, Reuters reported today. The company said it has the support of its senior noteholders to implement the plan, which will reduce the operating unit's debt to $8.6 billion from $18.4 billion. The bankruptcy protection was filed by Caesars Entertainment Operating Company Inc. and several affiliates in the U.S. Bankruptcy Court for the Northern District of Illinois. They listed assets and liabilities of over $1 billion, according to the filing. Much of the debt is a legacy of the $30 billion leveraged buyout of Harrah's Entertainment that was led by Apollo Global Management and TPG Capital in 2008. Under the plan, the operating unit will be split into a casino company and a publicly traded real estate investment trust.

Junior creditors of Caesars Entertainment Corp. moved to force the main operating unit into bankruptcy in an attempt to block a plan to protect senior lenders at their expense, after contentious wrangling over the casino company’s future, Bloomberg News reported today. The involuntary chapter 11 filing today by Appaloosa Investment LP and other junior lenders in Delaware pre-empts Caesars’ own effort to put the unit under bankruptcy court protection and threatens to scuttle a deal between the company and senior creditors. Appaloosa asked the court to appoint an examiner to investigate claims that insiders “plundered” the unit, paying themselves hundreds of millions of dollars while moving assets out of the junior creditors’ reach. The filing by Appaloosa and other holders of second-priority senior secured notes in the unit follows months of negotiation and litigation between Las Vegas-bases Caesars and its creditors.
http://www.bloomberg.com/news/print/2015-01-12/appaloosa-files-to-put-c…

In related news, bondholders of Caesars Entertainment Corp. will continue their fraud lawsuit against the casino company controlled by Apollo Global Management LLC (APO) even after its operating unit’s planned bankruptcy filing around Jan. 15, Bloomberg News reported on Friday. Caesars was asking the judge to toss the lawsuit, saying that bankrupt companies are automatically protected from litigation. The bondholders, who accused Caesars and its directors from Apollo of “looting” assets from the insolvent unit that owes them money, said their claims against those parties aren’t affected by the rule. The Las Vegas-based company has made agreements with a few lenders to try to use bankruptcy court to cut about $10 billion of debt from the money-losing unit that runs the casinos by offering them fees and special payments, filings show. Those who sign up must agree to drop out of lawsuits, Caesars says in regulatory filings.
http://www.bloomberg.com/news/print/2015-01-09/caesars-bondholders-to-c…

Caesars Entertainment Corp. won more support for a plan to put its biggest unit into bankruptcy as soon as next week after a bondholder group that’s already on board with the restructuring bought $500 million of debt from BlackRock Inc., Bloomberg News reported today. Caesars, owned by Apollo Global Management LLC and TPG Capital, has been negotiating with creditors for four months on a plan to reorganize Caesars Entertainment Operating Co., the subsidiary that owns most of its casinos. Its proposal would restructure $18.4 billion of debt by putting the unit into bankruptcy as soon as Jan. 15 and turning it into a real estate investment trust.

A group of Caesars Entertainment Corp.’s senior bondholders is holding out for more money, threatening to make it difficult for the casino owner to obtain enough creditor votes to make its bankruptcy plan a reality, Bloomberg News reported yesterday. Investors who say they own $1.6 billion in Caesars first-lien notes hired law firm Debevoise & Plimpton LLP to negotiate for better terms, said My Chi To, a partner at the New York-based firm. Caesars has five days before a deadline to win more support from bondholders for a restructuring agreement it struck with some creditors last month. The agreement with investors including Elliott Management Corp. and Pacific Investment Management Co. requires the company to sign at least 60 percent — or $3.8 billion — of first-lien bondholders by Jan. 12 onto its plan to restructure Caesars Entertainment Operating Co. To win court approval for a related bankruptcy reorganization proposal, Caesars would need support from creditors holding at least two-thirds of the bonds.

LightSquared, the bankrupt wireless venture owned by Phil Falcone's Harbinger Capital Partners, on Thursday submitted a new restructuring plan under which Harbinger would hold onto a sizable stake in the company, Reuters reported yesterday. The plan is the latest in a string of so far unsuccessful restructuring efforts as Harbinger wrangles for control of LightSquared with its largest creditor, satellite mogul Charles Ergen. Throughout LightSquared's two-and-a-half-year journey in chapter 11, the company and creditors have advanced various proposals to fund its exit, some including Harbinger and others all but eliminating it from the capital structure. The latest would give Harbinger a 44 percent equity stake in a reorganized LightSquared, but no board membership or control over day-to-day operations. Fortress Investment Group and Centerbridge Partners, both LightSquared investors, would own 26 percent and 8 percent, respectively. Ergen's $1 billion chunk of LightSquared's loan debt would be repaid via notes.

A $1 billion pact between Nortel Networks Corp.'s U.S. unit and bondholders won court approval Thursday over the protests of the one-time Canadian technology giant, the Wall Street Journal reported today. The ruling from Bankruptcy Judge Kevin Gross means distressed-debt investors could stand to recover as much as $5 billion from Nortel’s collapse in 2009, including more than $1 billion in interest on $4 billion worth of debt. The Canadian parent company tried to derail the deal between Nortel U.S. and bondholders, arguing the settlement was the product of a defective process. The U.S. unit defended the settlement as a compromise on a claim for interest that could have reached $1.6 billion.

Creditors approved Brazilian shipbuilder OSX Brasil SA's revamped plan to emerge from bankruptcy yesterday, giving a boost to efforts by controlling shareholder Eike Batista to keep the company afloat while refinancing over $2.6 billion in debt, Reuters reported yesterday. OSX's own bankruptcy protection plan, as well as those from subsidiaries OSX Construção Naval SA and OSX Serviços Operacionais Ltda, were approved by an assembly of creditors in Rio de Janeiro, according to a securities filing. OSX had introduced a revamped plan a month ago. The plan still requires approval from a Rio bankruptcy court and from state-controlled lender Caixa Econômica Federal, with which OSX Construção Naval still has a loan in arrears, the filing said.

Scott Rothstein’s law firm creditors could soon be paid in full, more than five years after the exposure of Rothstein’s $1 billion-plus fraud brought on the firm’s collapse, the Wall Street Journal reported yesterday. A bankruptcy judge has been asked to approve a final distribution to unsecured creditors of Rothstein Rosenfeldt Adler, the now-defunct South Florida law firm that Rothstein used to conduct his massive fraud. Trustee Michael Goldberg, responsible for getting checks out to creditors, on Tuesday filed court papers seeking the court’s permission to send out of millions of dollars to the holders of nearly 80 unsecured claims. Among those slated for final payment are the NBA’s Miami Heat, which would receive nearly $172,000, and the American Heart Association, which would receive more than $26,000.

ABI’s Commission to Study the Reform of Chapter 11 unveiled hundreds of ideas yesterday for a “substantial modernization” of Chapter 11 of the U.S. Bankruptcy Code, Bloomberg News reported today. The Commission’s report followed more than two years’ research into ways to fix distressed companies, the group said in a fact sheet. They include making it easier to obtain financing during bankruptcy and creating an alternative path for small and medium-sized businesses to reorganize. The group suggests its proposal can accelerate companies’ exit from bankruptcy under chapter 11, which covers reorganizations, by adding a rule to avoid drawn-out and often expensive valuation fights between senior- and junior-ranking creditors. Lower-ranking creditors could get a chance at recovery if, after exiting chapter 11, the reorganized company’s value increases to a point where they “might have been in the money or received a greater recovery if the firm had been valued at a later date,” according to the Commission’s report.
http://www.businessweek.com/news/2014-12-08/bankruptcy-group-offers-con…

Click here to read the ABI Chapter 11 Reform Commission’s final report.
http://commission.abi.org/

To watch the ABI press conference yesterday releasing the final report, please click here.
http://commission.abi.org/

Sign up today for a special abiLIVE webinar tomorrow afternoon taking an in-depth look at the Commission’s final report.
http://www.abiworld.org/webinars/2014/1210Web/