Creditors of Caesars Entertainment who oppose the bankrupt casino group’s $18bn restructuring are trying to force its billionaire private equity backers to disclose their private wealth.
Last week, US bankruptcy court judge Benjamin Goldgar ruled in favour of a group of junior bondholders who are demanding the personal financial details of Apollo co-founder Marc Rowan and TPG co-founder David Bonderman — both of whom are multibillionaires.
The creditors say they are entitled to this information to ensure the individuals could afford any future judgment against them — although it is rare for individuals to have to contribute to settlements for corporate wrongdoing.
Apollo and TPG acquired Caesars in a $31bn leveraged buyout in 2008 but the weight of the debt involved led the casino group’s operating unit to file for bankruptcy early last year. Creditors have since claimed that the two private equity groups were guilty of asset stripping and breach of fiduciary duty, and Judge Goldgar ruled in late August that their lawsuits against the Caesars parent company can move forward.
An independent inquiry has suggested the value of claims could reach $5bn.
If Mr Rowan and Mr Bonderman fail to win a legal challenge against the disclosure ruling, they and two other executives from the firms, along with two members of Caesars’ management, will have to start producing bank accounts and tax forms outlining their personal fortunes, later this week.
Marc Kasowitz, the lawyer representing TPG, said: “We disagree with the Judge’s decision, which permits an unwarranted invasion into personal privacy and is contrary to well-established law. We are pursuing the appropriate avenues for judicial review.”
Apollo said in its court papers: “To illustrate the egregious overreaching involved here, the subpoenas by their terms would require the Apollo individuals to produce all receipts and instruction manuals for their children’s toys. The only possible conclusion is that the [dissident bondholders] crafted the subpoenas to harass their target and impose maximum burden.”
Both private equity firms are in favour of a restructuring plan whereby Caesars’ parent company would contribute $4bn worth of cash and securities to a reorganised Caesars Entertainment. This plan also involves dissident creditors receiving only 40 to 50 cents for each dollar they believe they are owed. If the plan is approved as currently structured, the private equity firms and their partners would also be released from all liability claims.
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However, this trade-off has been challenged by Judge Goldgar, who questioned the fairness of releasing the firms and partners from liability if they are not personally contributing to the settlement.
According to the official committee of the junior bondholders, the Caesars directors “have refused to produce a single document showing their financial resources or ability to satisfy claims for billions of dollars that would have been released under the [restructuring] plan without any payment by any [Caesars director]”.
Judge Goldgar agreed with these concerns, saying in court that the private equity group executives “would have to pony up the paper [financial info].”
Apollo and TPG have claimed there is no reason to doubt their ability to fund any far-off judgment, citing their vast resources as well as insurance and indemnification provisions.
Lawyers for the dissident creditors have agreed to exempt the private equity bosses’ family members from their data request.