Gerber was a bankruptcy court judge for 14 years. Among his more notable cases were General Motors, Adelphia Communications, and LyondellBasell.
Gerber retired from the bench on Dec. 31, 2014, although he remained available as a recall judge through Jan. 22 of this year. He joined Joseph Hage Aaronson LLC as of counsel on Feb. 3.
As CRO, the company said Gerber would “[advise] on a potential restructuring of Caesars Entertainment if the company cannot resolve its differences with [CEOC] and its creditors with regard to CEOC’s restructuring and related litigation against Caesars Entertainment, or if other factors make a potential restructuring of Caesars Entertainment advisable.”
In its first-quarter earnings release issued earlier this week, the company said that while it “currently contemplates liquidity to be sufficient through the end of the year, Caesars Entertainment’s cash balance will be consumed by expenses associated with the CEOC restructuring unless it identifies additional sources of liquidity to meet ongoing obligations as well as to meet its commitments to support the CEOC restructuring.”
The company added that unless it is able to obtain additional sources of cash, or if CEOC does not emerge from bankruptcy “on a timely basis on terms and under circumstances satisfactory to Caesars Entertainment, it is likely that Caesars Entertainment would seek reorganization under Chapter 11 of the Bankruptcy Code.”
Among other things, the company said it has so far spent $345 million on legal and professional fees associated with the CEOC restructuring and Chapter 11.
The company also reiterated its previous warning that a bankruptcy filing could result from adverse rulings in pending litigation in Federal and state courts in New York and Delaware, alleging fraudulent conveyance and other claims against it in connection with various restructuring transactions undertaken by the company in the years ahead of CEOC’s Chapter 11 filing in January 2015.
Those cases were automatically stayed against CEOC as a result of the Chapter 11 filing, but they continued as against Caesars Entertainment Corp. In late February, however, Chicago Bankruptcy Court Judge Benjamin Goldgar enjoined those cases from proceeding against Caesars Entertainment, in order to give the CEOC and its creditors a window to negotiate a consensual reorganization plan (see “Caesars bondholder suit halted as parties await examiner’s report,” LCD, Feb. 29, 2016). The injunction expires on May 9, however, and Goldgar has recently indicated that he does not plan to extend the injunction at this time, although it is worth noting that trials are currently imminent in the pending cases.
Meanwhile, voluntary mediation in CEOC’s Chapter 11 is continuing under former Federal Judge Joseph Farnan, Jr. More than 20 parties have agreed to participate, but the only publicly disclosed progress so far has been a tentative deal reached with a group of holders of the company’s 10.75% senior notes due 2016.
That possible deal is nothing to sneeze at, but it is the company’s second lien lenders, who are positioned to benefit the most from the potential lawsuits against Caesars Entertainment, that hold the key to a global settlement of CEOC’s Chapter 11.
The company, for its part, has long conceded a willingness to settle the claims in the context of a reorganization plan. The dispute has been over valuation.
Fred Kleisner, the chairman of the company’s strategic alternatives committee of the board of directors, said in Friday’s news release, “Caesars Entertainment has offered substantial value to CEOC in an effort to end the protracted and expensive bankruptcy proceedings of CEOC. Despite a proposal that would provide CEOC and its creditors with value that Caesars Entertainment believes would be more than sufficient to address the findings of the examiner, as well as settle the ongoing guarantee litigation pending against the company, there remains disagreement between the parties, over how to quantify and allocate this value.”
For reference, the company had valued its total contribution under CEOC’s most recently proposed reorganization plan at about $3.1 billion (calculated based on a $1.6 billion contribution under CEOC’s initial restructuring scheme proposed prior to its Chapter 11 filing, plus an estimated additional contribution of $1.5 billion in connection with the amended plan filed on Oct. 8, 2015 (see “Caesars to contribute an additional $1.5B to amended CEOC revamp,” LCD, Oct. 8, 2016).
The court appointed examiner in the case, meanwhile, said in his report filed on March 15 that potential damages arising out potential fraudulent conveyance and breach of fiduciary duty claims rated as strong (meaning a high likelihood of success) or reasonable (meaning better than a 50/50 chance of success) range from $3.6–5.1 billion (see “Caesars examiner: fraudulent conveyance damages could reach $5.1B,” LCD, March 16, 2016).
The current timetable has a disclosure statement hearing scheduled for May 25, and a deadline for filing objections to the disclosure statement set at May 17.
As reported, in order to meet certain bankruptcy court deadlines, CEOC had filed its latest proposal in the form of a “temporary” reorganization plan and disclosure statement on April 4. The company said the proposal intentionally omitted “certain numbers, values and exhibits” needed to determine both creditor recoveries and contributions from the company’s parent, Caesars Entertainment Corp., in order to “facilitate the ongoing mediation process” in the case (see “CEOC files new plan; mediation ongoing in settlement quest,” LCD, April 5, 2016).
The company has said numerous times that if it is unable to reach a settlement with CEOC creditors, it would seek to confirm its current reorganization plan at a hearing contemplated to begin on Nov. 7.
In practical terms, that means the company would have to lay its cards on the table—that is, disclose the missing “numbers, values and exhibits”—at some point prior to May 17, although those deadlines are always subject to extension. — Alan Zimmerman
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