At one point during trading on Wednesday, when the decision was announced, Caesars stock plummeted a whopping 60% to just $ 3.30. By the end of trading, the company’s stock was back up in the $ 5 range, but even that represented a 30% loss over the previous day.
The impetus for the crash was a decision from U.S. Bankruptcy Judge Benjamin Goldgar forcing the company to defend itself against a boat load of creditor lawsuits. All told, the combined lawsuits add up to more than $ 11 billion USD.
At the heart of this legal drama is Caesars’ desire to break up into two operating units – a move creditors say is being used to avoid paying out settlements to smaller creditors.
Under the terms of Caesars’ plan, the company’s two units would consist of one to run the casinos and one to manage the land they rest on. This would allow the casino operator to pay just pennies on the dollar to most of its smaller creditors.
Obviously, this plan doesn’t sit too well with what the courts call, junior creditors. They knew the plan to protect Caesars’ assets would be paid for mostly from their own pockets and the judge in the case agrees with them.
It’s tough to say exactly how the junior creditor lawsuits will turn out but one thing is for certain, the Caesars Entertainment Corporation bankruptcy case is still a long ways from its conclusion.
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