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Caesars’ Bankruptcy Tussle with Creditors May Be Near the Finale, Judge Responds to Mediator’s Resignation1

Caesars Entertainment Corp. is the closest it’s been to ending two years of rancorous court battles with bondholders over who should pay to fix the casino giant’s insolvent operating unit, which can’t afford to pay almost $20 billion in debt, Bloomberg News reported today. The company is giving creditors until midnight in New York to accept a sweetened offer of more than $5 billion in cash, new debt and stock in a reorganized company. A group of bondholders that have been the biggest obstacle to the company’s plan has agreed on the framework of a deal, people familiar with the talks said Thursday. Now the question will be whether the company’s more senior lenders — who were on board with previous iterations of the plan — will be willing to give up some of the gains they won at the negotiating table in order to get the plan approved. Those creditors, who hold Caesars’ bank loans and first-lien bonds, would need to give up “hundreds of millions of dollars” in recoveries, according to the offer Caesars disclosed on Wednesday. A deal would put the unit, Caesars Entertainment Operating Co., on track to exit one of the biggest bankruptcies of the past decade. Creditors including David Tepper’s Appaloosa Management have been battling the private-equity titans that acquired the company in a 2008 leveraged buyout, Apollo Global Management LLC and TPG Capital. Read more

In related news, Bankruptcy Judge A. Benjamin Goldgar provided comments on Wednesday regarding the resignation of the mediator in the case. Judge Goldgar offered clarification on some of the critical comments and misunderstandings he found within the resignation letter. Click here to read the court excerpt. 

“American Idol” Sheds Debt as Bankruptcy Plan Is Approved

The producer of “American Idol” won court approval to shed hundreds of millions of dollars of debt, and cleared a path toward working with Simon Fuller, the creator of the franchise, after it exits bankruptcy, Bloomberg News reported yesterday. Core Entertainment, which has continued to produce television programs including "So You Think You Can Dance" while in bankruptcy, won approval of a plan yesterday that includes a settlement with a committee of creditors and the cancellation of equity that had been owned by Apollo Global Management LLC and Twenty-First Century Fox Inc, according to court papers. Bankruptcy Judge <b>Stuart Bernstein</b> approved the plan yesterday, after hearing that most creditors had voted in favor, and all written objections had been resolved before the hearing, including one from Fuller.

Bankruptcy Court Approves Settlement Between HDL, LeClairRyan

The dispute between LeClairRyan and Health Diagnostic Laboratory may be settled, but the contentions between HDL’s former executives and the Richmond-based law firm appear far from over, the Richmond Times-Dispatch reported today. A bankruptcy judge approved the settlement agreement between LeClairRyan and HDL at the end of a four-hour hearing Thursday in which various executives’ attorneys argued against the agreement. The settlement, filed earlier this month, releases LeClairRyan from all the claims HDL had against it. It is not an admission of guilt on the part of the law firm, the document stipulates. Though HDL’s claims are not public record, they center on the legal advice — or lack thereof — that LeClairRyan may have given HDL while it worked for the downtown-based blood-testing laboratory. One issue frequently mentioned in court documents is the practice of paying process and handling fees to physicians who used HDL’s services. HDL paid unusually high process and handling fees during its heyday, before filing for bankruptcy in June 2015. The practice violated state and federal anti-kickback laws, according to the U.S. Department of Justice, which investigated the practice and is as a result suing several former HDL executives.

Greenspan Says He Would Like to See Dodd-Frank Bank Law Repealed

Former Federal Reserve Chairman Alan Greenspan said sweeping post-crisis reforms of the U.S. financial system haven’t fixed the problem they were designed to tackle and should be scrapped, escalating his long-standing criticism of the 2010 Dodd-Frank Act, Bloomberg News reported yesterday. Greenspan’s hands-off approach while he helmed the U.S. central bank was blamed by many critics for fostering conditions that incubated the global financial crisis. While Greenspan said in 2008 that his free-market ideology shunning regulation was flawed, he has for years been skeptical of Dodd-Frank, enacted after the turmoil to make banks stronger and subject to better oversight. U.S. Treasury Secretary Jacob J. Lew, in separate remarks on Thursday, said that Dodd-Frank had made the financial industry safer. “It would be a mistake to roll back the clock on these protections,” he said in testimony to Congress.

Pressure Mounts on Wells Fargo CEO John Stumpf

Democratic senators stepped up pressure on Wells Fargo & Co., urging the Federal Reserve Bank of San Francisco to reject the reappointment of Chief Executive John Stumpf to an advisory council and separately requesting an investigation of the bank’s labor practices, the Wall Street Journal reported today. The San Francisco Fed said yesterday that Stumpf had stepped down as a representative to the Federal Advisory Council, a group of 12 bankers that meets four times a year to discuss economic and banking matters with the Fed’s board of governors in Washington, D.C. The embattled chief executive and his bank have been at the center of a public and political storm following disclosures that thousands of Wells Fargo employees in recent years created as many as two million accounts without customers’ knowledge. Wells Fargo this month agreed to pay a $185 million fine and entered into an enforcement action with regulators and a local official. Stumpf had appeared on Tuesday before the Senate Banking Committee and was subjected to harsh questioning from both Democrats and Republicans. Some of the sharpest exchanges were with Sen. Elizabeth Warren (D-Mass.), who was among the signatories of the letters to the San Francisco Fed and Labor Department.

Puerto Rico’s Market-Beating Bonds Still Leave Holders Guessing

Puerto Rico bonds have outperformed U.S. stocks, corporate debt and every other corner of the municipal-securities market since the Caribbean island’s financial crisis precipitated an unprecedented federal takeover, Bloomberg News reported today. Yet investors still don’t know how much of what they’re owed they’ll get back. The rally, which pushed the S&P Dow Jones Puerto Rico index up nearly 14 percent since mid May, came after a series of defaults led President Barack Obama to enact a law in June aimed at halting the collapse. The resolution will now largely be up to a seven-member federal control board, which is entrusted with overseeing talks with creditors to restructure the island’s $70 billion of debt. If investors balk, Puerto Rico now has the power to have debt written down in court, as is routinely done in bankruptcy. While the control board was formed late last month, investors still have no clear indication of how much of their debt they’ll recoup — or when. One of Puerto Rico’s most frequently traded securities, general obligations due in 2035, sold yesterdayfor an average of 65.6 cents on the dollar. Read more

In related news, Puerto Rico's governor yesterday said that the island's power utility hoped to restore electricity to about half its 1.5 million customers by the afternoon, after a fire at an energy plant knocked out electricity for the bulk of the island. Governor Alejandro García Padilla said power had already been restored to about 130,000 people. The power authority, PREPA, said on Wednesday that two power lines, each 230,000 volts, failed for reasons still being determined. PREPA plants are largely outdated, and the agency has debt of more than $8 billion. Garcia Padilla said the switch where the fire occurred was correctly maintained. Read more

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