Caesars hit with $6 bln lawsuit tied to restructuring: Reuters

(Reuters) – Casino company Caesars Entertainment Corp was sued for more than $6 billion by a representative for noteholders who are the lone creditors backing its plan to overhaul $18 billion in debt.

The lawsuit, filed in Manhattan federal court on Monday, seeks damages equal to the outstanding principal and interest on at least $6.3 billion in first-lien notes issued by Caesars’ operating unit, which filed for bankruptcy in January.

The lawsuit was brought by UMB Bank, which is the indenture trustee for several issuances of first-lien notes, and not by actual noteholders, which include the Elliott Management investment fund.

UMB said Caesars breached terms of the notes and the U.S. Trust Indenture Act by voiding a guarantee of the operating unit’s obligations.

Caesars is already defending several lawsuits accusing it of improperly benefiting from the transfer of the best casinos out of its operating unit over the past several years, leaving the unit unable to pay its debts.

The lawsuits have said Caesars’ private equity backers, Apollo Global Management LLC and TPG Capital Management LP, also benefited from those asset transfers. A court-ordered examiner is investigating the transactions, which Caesars has said were fair.

Elliott and several other funds holding the notes have agreed to support a restructuring plan that centers on breaking the bankrupt unit into a casino operator and a property company, which investors tend to value more highly.

Caesars said in a statement on Tuesday the lawsuit was without merit and that its restructuring agreement with Elliott and other the first-lien noteholders remained in effect.

The operating unit, Caesars Entertainment Operating Co Inc, has asked the U.S.bankruptcy judge overseeing its case to put a hold on creditors’ litigation against the parent company to allow the disputes to be resolved through negotiation.

Without this stay, the operating unit warned in a May court filing, the first-lien noteholders “undoubtedly will join” the flurry of lawsuits filed outside the bankruptcy to make sure their claims get heard along with those of junior creditors.

U.S. Bankruptcy Judge Benjamin Goldgar in Chicago said he would rule on the request to stay the litigation on July 22.

Shares of Caesars closed down 3.9 percent at $6.60 in Nasdaq trading.

Elliott Management and lawyers for UMB Bank did not respond to requests for comment.

The case is UMB Bank v Caesars Entertainment Corp, U.S. District Court for the Southern District of New York, No. 15-cv-04634. (Reporting by Tom Hals in Wilmington, Delaware; Editing by Lisa Von Ahn and Steve Orlofsky)