MeehanCombs Global Credit Opportunities Funds, LP v. Caesars Entertainment Corp.
United States District Court for the Southern District of New York
80 F. Supp. 3d 507 (2015)
- Written by Eric Miller, JD
Facts
Caesars Entertainment Operating Company, Inc. (Caesars Operating) (defendant) issued notes guaranteed by its parent company, Caesars Entertainment Corporation (Caesars Entertainment) (defendant), pursuant to indentures. Caesars Operating and Caesars Entertainment were later acquired by two private equity funds in a leveraged buyout. This led to a series of transactions in which Caesars Operating transferred its assets yet retained its debt. Supplemental indentures gave noteholders who approved the transactions favored treatment, including full payment in exchange for their consent to the termination of Caesars Entertainment’s guarantee of the other notes. MeehanCombs Global Credit Opportunities Funds, LP (MeehanCombs) and other noteholders (plaintiffs) brought suit in federal district court in New York, alleging violation of § 316(b) of the Trust Indenture Act (TIA), which prohibited the impairment of a bondholder’s right to receive or bring suit for payment. The bondholders also alleged breach of contract and breach of the implied covenant of good faith and fair dealing. MeehanCombs also alleged violation of TIA § 316(a), which permitted a majority of creditors to direct a trustee’s exercise of power unless those creditors were directly or indirectly under common control. Caesars Operating and Caesars Entertainment moved to dismiss.
Rule of Law
Issue
Holding and Reasoning (Scheindlin, J.)
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