Caesars Entertainment Corp hires new restructuring officer; Warns of Chapter 11
On Friday, Caesars Entertainment Corp (NASDAQ: CZR) announced that retired bankruptcy judge Robert Gerber has been appointed to the newly created position of chief restructuring officer. Reuters reports that the announcement comes on the heels of the parent company warning that it may be forced into Chapter 11 bankruptcy in the face of billions of dollars in creditor claims stemming from the company’s failed operating unit (CEOC).
Yesterday the company said that if creditors prevail in their claims that the parent company inappropriately transferred assets before seeking bankruptcy protection for the operating unit, or if CEOC stayed in bankruptcy proceedings for an extended period of time, it is likely, “that Caesars Entertainment would seek reorganization under Chapter 11 of the bankruptcy code.”
Caesars is currently named in several creditor lawsuits for Caesars Entertainment Operating Co, with junior creditors seeking billions of dollars. The creditors have stated that the company shuffled valuable properties before filing for bankruptcy protection, an allegation that Caesars denies.
Based on the legal costs continuing to pile up, an independent director committee of the company recommended that Robert Gerber be hired as a restructuring officer. Gerber is a retired United States Bankruptcy judge for the Southern District of New York who retired from the bench in January.
Back in March, an independent examiner suggested that as much as $5.1 billion in transactions involving the CEOCbefore filing bankruptcy may be due the operating company.
One day before announcing Gerber’s new role within the company, Caesars announced they had taken a charge of $237 million during the first quarter in regards to potential payments to support the reorganization plan for CEOC.
Caesars said due to mounting legal costs its independent director committee had recommended the appointment of Robert Gerber, who retired as a U.S. Bankruptcy judge for the Southern District of New York in January, for the new role.
An independent examiner said in March that Caesars may be responsible for up to $5.1 billion for transactions involving CEOC prior to its bankruptcy.
Despite a proposal that it said was “more than sufficient” to address the findings of the examiner, Caesars said there was still disagreement between the parties over how to settle the claims.
Gerber presided over the General Motors bankruptcy in 2009 and a wide variety of other Chapter 11 cases during his 15 years on the bench in New York.
“We’ll see if Judge Gerber can push the parties to a resolution. In GM, he had the big Washington stick. Here, he has sophisticated private equity firms and complex debt and corporate structures with which to deal,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business.
On Thursday, Caesars said it had taken a $237 million charge in the first quarter for potential payments to support CEOC’s bankruptcy reorganization plan.
Shares of the Las Vegas, Nevada-based company closed 0.4 percent higher at $6.77 on Friday.