Junior creditors’ demand for a quick ruling was denied and they will have to wait for trial.
US.- Bondholders MeehanCombs Global Credit Opportunities Funds and Frederick Barton Danner filed a lawsuit alleging the casino company failed to honour guarantees of bonds issued by its bankrupt subsidiary and requested a quick ruling on the matter. The junior creditors claimed that Caesars violated the Trust Indenture Act, or TIA, by unilaterally releasing consent guarantees of bonds issued by its bankrupt operating unit.
In May 2014, Caesars sold 5 percent of its main unit, Caesars Entertainment Operating Co (CEOC), to undisclosed institutional investors. The casino operator claimed it was stipulated on the fine print of the bondholder agreements that if Caesars was not the owner of the 100 percent of the equity in CEOC, it was no longer obligated to honour guarantees worth billions of dollars to junior creditors. Caesars Entertainment Corp filed for bankruptcy protection in January, citing over US$18b in long term debt and proposing a restructuring plan that would cut that debt in half but would negatively affect its junior creditors.
Last Tuesday, District Judge Shira Scheindlin in Manhattan stated that there were material disputes regarding the May 2014 stock sale and its impact on the guarantees on US$750 million of unsecured bonds and therefore, those disputes would have to be resolved only by trial.