Leon Black’s Caesars Entertainment was one of the few stocks to rise from Monday’s ashes, but investors should know it’s a crapshoot, sources said.
A Manhattan federal judge is close to ruling whether Caesars illegally broke its contract with bondholders.
If New York federal Judge Shira Scheindlin rules for the suing bondholders in a $750 million case considered too close to call, then Caesars has said it will likely have to file for bankruptcy.
Caesars in January put its biggest unit, Caesars Entertainment Operating Company, into bankruptcy. However, on Friday it announced it had reached a deal with senior lenders of that unit on a restructuring.
That caused the shares to spike, since investors believe that a larger restructuring deal is in the works, and the parent company will remain solvent.
Shares rose 12 percent, to close at $8.98.
“The stock price is not very logical at the moment,” a Caesars analyst said, requesting anonymity, since investors are not factoring in, or are unaware of, the judge’s decision expected within days that would supersede any restructuring agreement.
Caesars, controlled by Apollo Global Management, is in fact rushing to put a restructuring deal together so it can get the suing bondholders to drop their suit, sources speculate.
However, Caesars has not yet engaged in discussions with the junior creditors, including XAIA, Arrowgrass Capital Partners or BlueMountain Capital, that have brought the $750 million suit through trustee Bank of Oklahoma, sources said.
Caesars, if it loses the case, would appeal to the federal Court of Appeals, sources said.
There is a question if the parent company would have the funds to post a bond if it did not get a stay from the appeals court.