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

The Pak Banker - - COMPANIES/BOSS -

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.

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