(New from paragraph three with details from court hearing)
WILMINGTON, Del, Jan 27 (Reuters) - The operating unit of Caesars Entertainment Corp will learn Wednesday whether its bankruptcy will proceed in Chicago, where the casino company filed for Chapter 11 this month, or in Delaware, a U.S. bankruptcy judge in Delaware said on Tuesday.
Allowing the case to proceed in Chicago would be a victory for Caesars private equity backers, Apollo Global Management and TPG Capital. A group of hedge fund creditors led by Appaloosa Management want the bankruptcy, which seeks to eliminate $10 billion of debt, to proceed in Delaware.
"If you could read my mind you still wouldn't know which way I'm going to go," said Judge Kevin Gross at the end of a 4-hour hearing in Wilmington, Delaware on Tuesday.
Gross said he will read his ruling at 11 a.m. on Wednesday.
The company finds itself in the unusual situation of being in two bankruptcies at once after Appaloosa and two other hedge funds filed what is known as an involuntary bankruptcy in Wilmington on Jan. 12. Three days later, the operator of 38 casinos filed its own Chapter 11 in Chicago.
The bankruptcy is expected to center on legal releases for the parent company, Apollo and TPG from claims they allegedly "looted" the operating unit's best properties. Caesars has said the transfers of assets out of the operating unit were done for fair value.
In Chicago, those legal releases are easier to obtain and creditors would have more negotiating leverage in Delaware.
Prior to filing for bankruptcy, the company got the backing of its first-lien noteholders for a deal to split the Caesars' unit into a casino operator and a property company.
That deal will be easier for angry creditors to challenge in Delaware.
A Delaware case for the company known as CEOC could be lengthy and more contentious, according to one credit analyst.
"Not only could the Delaware venue assist the claims of the junior creditors, it might cause the restructuring agreement that CEOC has cobbled together with a majority of first-lien bondholders to unravel," wrote Kim Noland, a Gimme Credit analyst, in a Monday note.
David Zott, an attorney for the operating unit, said Tuesday everyone is best served through a settlement with creditors. That would be easier to achieve under the Chicago legal standard, he said.
Otherwise, Zott said, "we litigate till the end of days." (Reporting by Tom Hals in Wilmington, Delaware; Editing by Chris Reese and Richard Chang)