A group of investors and lenders have won the right to press on with claims potentially worth billions of dollars against Caesars Entertainment Corp., after a federal bankruptcy judge ruled bankruptcy filings by a subsidiary company shouldn’t shield the parent company from legal actions brought by bondholders and creditors alleging Caesars used a series of refinancings and transfers between the companies to improperly shield assets.

U.S. Bankruptcy Judge A. Benjamin Goldgar, ruling in federal bankruptcy court in Chicago on July 22, denied a motion from Caesars Entertainment to stay or place an injunction on the creditors’ litigation now pending in New York and Delaware while bankruptcy proceedings continue for the subsidiary, known as Caesars Entertainment Operating Company.

“Because the bankruptcy estates and the defendants have not been shown to have claims arising out of the same acts, that could be paid with the proceeds of the insurance the debtors (subsidiary company CEOC) share with (parent company) CEC, and because the insurance proceeds are not property of the bankruptcy estates, the debtors (CEOC) are not entitled to have the defendants’ (creditors’) actions in Delaware and New York enjoined,” Goldgar wrote in his opinion.

Caesars, through its subsidiary company, appealed the decision July 27 to U.S. District Court in Chicago.

Caesars Entertainment owns, operates and manages 50 casinos with more than 3 million square feet of gaming space in the U.S. and internationally, locally including Harrah’s Joliet and Horseshoe Casino in Hammond, Ind., in the Chicago area, with 39,000 hotel rooms. The company employs 68,000 people.

According to court documents, the company brought in more than $8 billion in revenue in the 2014-15 fiscal year.

Caesars had been acquired in a leveraged buyout in 2008 by a group including Apollo Global Management and TPG Capital for $30.7 billion, financed largely by more than $24 billion in debt. Of that debt, $19.7 billion was secured with liens on “substantially all of debtors’ (CEOC’s) assets.”

When the economy cratered amid the Great Recession in 2008, Caesars’ revenue suffered, as well, prompting the company to move in 2009 to begin to refinance and restructure the company, its subsidiaries and its debts.

The restructuring ultimately led the subsidiary CEOC to file for voluntary Chapter 11 bankruptcy protection in January, hoping to get out from under about $10 billion in debt.

However, that action also followed a series of lawsuits filed in 2014 by Caesars’ creditors over Caesars’ moves to refinance and sell off some of its debt, using the transactions as a basis to declare billions of dollars in debt would no longer be guaranteed by Caesars property.

The creditors assert the moves were intended to use the subsidiary company to essentially create two Caesars – a “good Caesars,” the parent company, to hold Caesars’ valuable assets, and a “bad Caesars,” the subsidiary CEOC, which would be “left with barely profitable or unprofitable properties and burdened with debt” – and, ultimately, leaving creditors unable to recover their investments.

Following the bankruptcy filing, Caesars filed suit, asking the bankruptcy judge to declare the creditors’ lawsuits needed to wait, arguing any awards granted to the creditors could upset Caesars’ plans to restructure the company, which the company said would include a transfer of $2.5 billion from the parent company to CEOC.

Judge Goldgar, however, said the need for CEOC bankruptcy protection and the potential transfer of that money, as well as the award of certain insurance proceeds, are distinct from the creditors’ lawsuits. As such, the judge said, the creditors’ claims should be allowed to proceed.

Caesars Entertainment Operating Company is represented in the action by the firm of Kirkland & Ellis, of Chicago and New York.

The various creditors are being represented by the firms of Foley & Lardner, of Chicago; Grant & Eisenhoffer, of Chicago and New York; Drinker Biddle & Reath, of Chicago and New York; Jones Day, of Chicago, New York and Washington, D.C.; Arent Fox, of New York and Washington, D.C.; Kelley Drye & Warren, of New York; and Gardy & Notis, of New York.

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