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Caesars, Second-lien Debtholders Sue Each Other

Tickers in this article: CZR

NEW YORK (The Deal) -- Casino giant Caesars Entertainment and its second-lien bondholders have taken their grievances to the courthouse, with each group filing a lawsuit against the other.

The trustee for the second-lien bondholder group alleged in a lawsuit filed the night of Aug. 4 in the Court of Chancery of the State of Delaware that the Las Vegas-based company's restructuring strategy has harmed its operating unit, Caesars Entertainment Operating Co.

Then, on Tuesday, the parent company claimed in a lawsuit filed in the Supreme Court of the State of New York, County of New York, in Manhattan that second-lien bondholders and first-lien holder Elliott Management Corp. have aimed to push Caesars to default in order to profit from their credit default swap positions.

Jones Day partner Bruce Bennett, who represents the second-lien bondholder group and its trustee, Wilmington Savings Fund Society FSB, said in an emailed response, "The complaint demonstrates that the Caesars Entertainment Operating Company has made numerous transfers over the past several years that worsened its already distressed financial condition and were abusive to its creditors. The filing reflects confidence that there are remedies at law and equity to address the effects of these transactions."

Other Jones Day partners on the case are Sid Levinson, Josh Mester, and Geoff Stewart.

The second-lien bondholder group served CEOC with a notice of default on June 5, claiming that certain asset sales involving the subsidiary constitute a default, as does the release of the parent company's guarantee of CEOC's debt.

The casino operator denies that a default has occurred.