By: Anne M. Smith, Attorney
Recently, Caesars Entertainment Corporation filed for bankruptcy protection. It is seeking to freeze lawsuits and actions of creditors, and permit reorganization of debts and assets so the business can continue with day to day operations.
Is a casino entitled to protection from its creditors? While this may ultimately be more of a moral question, since this business entity is entitled to the remedies provided by our laws, the question of whether it’s the best remedy for all parties, not just Caesars. And frankly, is it fair?
In the face of involuntary bankruptcy as pushed by three creditors in Delaware, Caesars has filed its own chapter 11 in Illinois, where it may be easier for the casino owners to be protected from liability. There have been allegations of inside deals and possible fraud regarding transfer of assets, and I have no doubt that the Court will scrutinize every aspect of every transfer in recent years relating to this $20 billion bankruptcy. The basis for the chapter 11 is Caesars’ claim that it carries more debt than any other U.S. casino-hotel company, and that its owners have been reluctant to spend money on up-growth in gambling markets. Poor management decisions and staggering debt have led this faction of Apollo Global Management LLC and TPG Capital LP to seek protection. So the question is whether these parent companies foisted more debt on this single entity to bolster their own bottom lines, and should they be able to seek protection with such a cloud of suspicion.
When a casino is involved, it is difficult to be unbiased about its right to ask for bankruptcy protection. Why would a casino ever need help to restructure debt, when its very existence acts as a vice to so many consumers? The reasoning behind this filing may certainly be problems and debts of the casino owners’ own making, but can’t that be said of many debtors? Remember that our laws allow this protection and aid when it is deserved, as determined by our judges. The court bears the burden of making sure the laws are followed, without determination of morality or judgment by the public.
A quick search of Pacer for Caesars reveals 87 filings since January 12, 2015. Caesars’ initial voluntary petition lists assets totaling over $12 billion, and debts exceeding $19 billion. The list of creditors is staggering, as are the amounts owed to each. If the house always wins, why do so many casinos end up in bankruptcy?
Below is the link to Wikipedia’s entry for Caesars Entertainment Corporation, for more specific information about their operating expenses and company history.