Caesars Entertainment Corp (CEC) has issued a “going concern” warning in relation to bondholder lawsuits – some of them linked to the fact of the bankruptcy proceedings of its operating unit.
The casino group said in a Nasdaq filing on Monday: “We have concluded that the material uncertainty related to certain of the litigation proceeding against CEC raises substantial doubt about the company’s ability to continue as a going concern.”
Caesars Entertainment has not previously issued such a warning, despite as of September last year accumulating long-term group debts of nearly US$23 billion.
Caesars Entertainment Operating Co Inc (CEOC) – the part of the business running some of the group’s most profitable venues including flagship properties in Las Vegas – requested reorganisation under Chapter 11 of the U.S. Bankruptcy Code from a court in Chicago on January 15. It was part of a plan to cut group debt by approximately US$10 billion.
Some bondholders had previously filed suits in the U.S. alleging in effect that Caesars Entertainment as a group was trying to cherry pick its relationships with creditors by having split the business into different parts, when the overall debt load of the business was in effect generated by the activities of the whole group.
Caesars Entertainment said in its Monday filing: “The litigation pending against CEOC, and in certain cases against CEC and its other subsidiaries, have been stayed due to the Chapter 11 bankruptcy process, however, certain litigation and the demands against CEC are continuing outside of the Chapter 11 bankruptcy process.”
The company further stated in its filing: “We believe that the litigation claims and demands against CEC are without merit and intend to defend ourselves vigorously. At the present time, we believe it is not probable that a material loss will result from the outcome of these matters.”
The rules requiring managements of U.S.-listed companies to report on risks amounting to a threat to “going concern” were tightened following a number of corporate accounting scandals in the U.S. in the late 1990s and early 2000s.
CEOC early this month revealed plans to exit early from its voluntary bankruptcy.
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