Caesars fends off bondholders' request for quick ruling

U.S. District Judge Shira Scheindlin in Manhattan said there were material disputes regarding a May 2014 stock sale and its impact on the guarantees on $750 million of unsecured bonds.

Those disputes would have to be resolved by a trial, the judge said in a 31-page opinion that denied the bondholders' request for a quick ruling.

Bondholders MeehanCombs Global Credit Opportunities Funds and Frederick Barton Danner alleged that Caesars violated the Trust Indenture Act, or TIA, by unilaterally releasing consent guarantees of bonds issued by its bankrupt operating unit.

A Caesars spokesman declined to comment and lawyers for the bondholders did not immediately respond to a request for comment.

Scheindlin's ruling follows a similar decision in August in a case brought by representatives of other bondholders suing Caesars over similar violations of the TIA, a Great Depression-era law meant to protect bondholders.

Caesars has said if it loses the TIA cases it would likely be forced to join its operating unit in bankruptcy. But rather than proceed to trial, the MeehanCombs case may be put on hold.

Caesars said in court papers it would seek an injunction staying the case until 60 days after an independent examiner, Richard Davis, completed his investigation of alleged fraudulent transfers of the casino company's assets. The examiner was ordered by U.S. Bankruptcy Judge Benjamin Goldgar and the examiner's report is expected in early 2016.

Creditors have alleged that years of asset transfers prior to the bankruptcy by Caesars' operating unit put many of the best casinos beyond the reach of creditors.

The operating unit has been attempting to reach a consensus in bankruptcy with creditors on restructuring its roughly $18 billion debt load.