Caesars Settles One Bondholder Lawsuit

Caesars Entertainment Corp. has struck a deal to settle one of several pending bondholder lawsuits, a key step toward peace in the contentious bankruptcy case of the casino company's largest operating unit.

The settlement, which Caesars disclosed Wednesday in a filing with the Securities and Exchange Commission, resolves a class-action lawsuit brought by the holders of unsecured bond debt issued by its Caesars Entertainment Operating Co. unit. Like other litigation pending against Caesars, the lawsuit sought to hold Caesars to guarantees of the bankrupt CEOC unit's debt.

Under the settlement, which was reached Monday, lead plaintiff Frederick Barton Danner agreed to drop the lawsuit in a New York federal court and to support CEOC's chapter 11 restructuring, which includes a broader settlement of potential legal claims against Caesars and its private-equity backers, Apollo Global Management and TPG.

In return, CEOC will pay the fees of Mr. Danner's lawyers and will provide unsecured bondholders who vote in favor of its restructuring plan with extra cash equal to at least 6.38% of the bond debt they hold.

A lawyer for Mr. Danner couldn't immediately be reached for comment Wednesday, and a Caesars spokesman declined comment beyond the regulatory filing.

Mr. Danner sued Caesars in the U.S. District Court in Manhattan in October 2014, several months before CEOC sought chapter 11 protection. The class-action suit claimed an August 2014 financing transaction was improperly designed to release Caesars of its guarantee of $750 million in unsecured debt due 2016. The suit alleged that the deal was done without bondholders' consent, violating their rights under the Trust Indenture Act.

Caesars has said that transaction, and others targeted in similar lawsuits brought by holders of various CEOC bond debt, was proper and necessary to shore up its troubled operating unit.

Caesars still faces several other bondholder lawsuits in federal court in New York, and one in a Delaware state court, over billions of dollars' worth of CEOC debt guarantees. By bankruptcy-court order, however, those lawsuits are on hold until Aug. 29, although CEOC is seeking an extension of the lawsuit shield now protecting its parent.

Since filing for chapter 11 protection in January 2015, CEOC has sought a broad settlement with its creditors and its parent, which the bondholder litigation has complicated. At issue are a series of prebankruptcy financing deals and asset transfers. Bondholders and CEOC each say they have legal claims against Caesars, Apollo and TPG in connection with the deals, which they allege were designed to protect CEOC's owners at the expense of its creditors. Caesars and its owners dispute the allegations.

Write to Jacqueline Palank at [e-mail]

(END) Dow Jones Newswires

August 17, 2016 11:45 ET (15:45 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.