Caesars Entertainment (CZR), along with its private-equity backers TPG Capital and Apollo Global Management, might have breached their fiduciary duty to its creditors by moving assets around. Caesars may be liable for over $5 billion in damages, according to a bankruptcy examiner.
Richard Davis, court-appointed examiner, noted in a report, “Aiding and abetting breach of fiduciary duty claims, again of varying strength, exist,” when speaking of Caesar’s directors and the company’s sponsors TPG and Apollo.
Directors on Caesars board include David Bonderman, TPG founder, and Marc Rowan, Apollo founder.
Caesars’ owners have been locked in a heated battle with creditors for over year, who claim that that Caesar’s shuffled its best assets out of reach of creditors without paying acceptable compensation.
The moving of assets occurred in January 2015 among new entities after Caesars’ largest unit went into bankruptcy.
According to Davis, Caesars may be liable for paying creditors between $3.6 billion and $5.1 billion, far beyond the $1.8 billion that was offered to its creditors in its restructuring plan.
The report notes that this figure does not include the value of the World Series of Poker, Caesars’ social gaming business, which could be “potentially significant.”
The end figure may be more than the already-struggling Caesars can afford, and may put the entire company into bankruptcy.
Caesars’ chain includes 49 casinos, and 28 of those casinos are in its bankrupt unit. Davis has been investigating whether creditors and Caesars Entertainment Operating Co. incurred damages from the transferring of assets before Caesars went into bankruptcy.
No common law fraud or criminal activity was found in the examiner’s report, but it may prove to be damaging to Caesars’ case. Creditors have a 50% or higher chance of succeeding with their claim, according to Davis. Caesars defended its move, stating that the challenged transactions were meant to strengthen the company and provide it with adequate liquidity to sustain operations and recover from market challenges.