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By Tracy Rucinski
CHICAGO Oct 5 A U.S. judge on Wednesday halted
a lawsuit against Caesars Entertainment Corp, saying it
could derail last week's $5 billion agreement that was aimed at
extracting the casino company from a costly bankruptcy.
While a vast majority of Caesars creditors agreed to drop
some $13 billion in legal claims against the casino group last
week, a hedge fund with a $9.4 million claim refused to back the
deal and sought to pursue its lawsuit.
Trilogy Capital Management is one of several hedge funds
that had accused Caesars of scrapping a guarantee on the debt of
its bankrupt subsidiary, Caesars Entertainment Operating Co Inc
(CEOC). A judgment in New York was due as soon as Thursday.
"The risk that the Trilogy action will derail the
reorganization is too great," Judge Benjamin Goldgar said in
U.S. Bankruptcy Court in Chicago on Wednesday.
CEOC has secured the support of creditors who until last
week were threatening its Nasdaq-listed parent with billions of
dollars in claims over a series of transactions prior to the
unit's bankruptcy filing in January 2015 with $18 billion of
Shares of Caesars were up 1 percent at $7.72 in afternoon
trade. The stock has risen about 14 percent since the company
unveiled its sweetened offer for holdout creditors on Sept. 21.
Goldgar said the injunction on all remaining litigation
against Caesars was necessary to preserve the settlement and
could last through a January trial to confirm CEOC's
Trilogy immediately appealed Goldgar's ruling and U.S.
District Court Judge Robert Gettleman in Chicago scheduled a
Dec. 5 hearing.
CEOC filed a formal restructuring support agreement with all
of its major creditors on Wednesday, subject to certain
conditions such as the injunction on litigation against Caesars
remaining in place. It said the agreement is a "key milestone"
in its effort to implement a consensual restructuring.
CEOC will cut over $10 billion of debt and split into an
operating company and a separate real estate investment trust as
part of its plan to emerge from bankruptcy in 2017.
Following the restructuring, private equity shareholders
Apollo Global Management and TPG Capital Management LP
will hold 16 percent in a new Caesars casino group.
Apollo and TPG formed Caesars through the $30 billion
leveraged buyout of Harrah's Entertainment in 2008, just before
the U.S economy tipped into recession.
(Reporting by Tracy Rucinski in Chicago; Writing by Tom Hals in
Wilmington, Delaware; Editing by Chizu Nomiyama, Jeffrey Benkoe,
Chris Reese and Bernard Orr)