Caesars could face $5b hit from unit's bankruptcy

NEW YORK: Caesars Entertainment Corp (CZR.O) and its private equity backers could be on the hook for up to $5.1 billion in potential damages over a series of corporate deals that a court-ordered examiner said Tuesday led to a $18 billion bankruptcy protection filing by the casino company's operating unit. Richard Davis and a team of lawyers have spent a year probing whether Caesars, under the control of Apollo Global Management (APO.N) and TPG Capital [TPG.UL], stripped away prime properties such as the LINQ Hotel & Casino in Las Vegas and left the company unable to pay a mountain of debt.

"The simple answer to this question is 'yes'," wrote Davis at the start of an 80-page summary of his non-binding investigation, published Tuesday. The bankruptcy of Caesars Entertainment Operating Co Inc (CEOC) has pitted some of the biggest names in U.S. finance against each other in a yearlong court battle. Junior creditors, led by the powerful Appaloosa Management hedge fund, have alleged CEOC was picked clean of its best hotels and casinos for the benefit of the Caesars Entertainment (CEC), as well as Apollo and TPG.

Davis, a former Watergate investigator, estimated potential damages for claims that he said would have a better than 50 percent chance of success in court ranged from $3.6 billion to $5.1 billion.

Those claims included fraudulent transfers of assets and breaches of fiduciary duties against the directors and officers of the operating unit and against the parent, Caesars Entertainment, he said. In addition, he said claims for aiding fiduciary breaches existed against Apollo and TPG. None of the claims involve criminal or common law fraud, Davis said. In a statement late Tuesday, CEC said it disagreed with Davis's conclusions. The transactions in question added "immense and indisputable benefit to CEOC and its creditors", CEC said.