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Apollo’s Caesars Strategy Teeters as Bond Judgment Day Nears

As the judge sees it, there’s about $1.2 billion standing between bankrupt Caesars Entertainment Operating Co. and a deal to get it out of Chapter 11.

What exasperates the bankruptcy judge, A. Benjamin Goldgar, is how long it’s taken the casino giant to go looking for the money where it’s most likely to be found: with the private equity firms that creditors blame for exacerbating the company’s woes.

“We’re 20 months into this,” Goldgar told a company financial strategist at an Aug. 23 hearing. “How could this not have occurred to somebody until just in the past few weeks?”

Goldgar expressed astonishment that the operating company waited until early August to seek help from its indirect owners, Apollo Global Management LLC and TPG Capital. After all, Goldgar said, an investigation he ordered last year found the firms are potentially liable for $5.1 billion in damages related to the bankruptcy, which was filed in January 2015.

His solution: Lift a ban on bondholder lawsuits against parent Caesars Entertainment Corp. and its owners. So, rather than be forced to accept a restructuring plan that releases Apollo and TPG from liability, creditors now may get their day in court and potentially push the non-bankrupt parent into Chapter 11 alongside the operating unit.

Bankruptcy could erase the value of Caesars’s shares, including the 60 percent stake held by the private equity firms, which took over the Las Vegas-based casino company in a $30.7 billion leveraged buyout eight years ago.

“I think Goldgar’s ruling -- in particular his focus on the failure of Apollo and TPG to contribute to the settlement -- means that the Caesars parties won’t be able to get their plan confirmed without Apollo and TPG kicking in,” said Julia Winters, a Bloomberg Intelligence analyst in New York and former bankruptcy litigator.

Lawsuits against the parent have been held up in New York for months. Cases in Chicago and Delaware, which aren’t as far advanced, target Apollo and TPG directly, along with their top executives, including TPG co-founder David Bonderman and Apollo co-founder Marc...