[NEW YORK] A fight between creditors and Caesars Entertainment Corp over some US$18 billion of unpaid debt has moved to Washington as the casino firm and its private equity owners lobby to change a law that protects bondholders.

Caesars, owned by Apollo Global Management and TPG Capital, saw its unit, Caesars Entertainment Operating Co, file for bankruptcy in January, partly after its US$30.7 billion leveraged buyout in 2008 ran into trouble during a slump in gambling.

The bankruptcy has drawn a number of lawsuits from creditors, including complaints that Caesars did not guarantee the debt of its unit before filing for Chapter 11. They said the move violated the Trust Indenture Act, a law that protects bondholders from out-of-court deals.

In defence, two sources with knowledge of the matter said Caesars and Apollo were lobbying elected officials to revise the act to limit lawsuits from creditors in bankruptcies. The sources declined to be named as they were not authorised to speak publicly on the matter.

The law has been around since the 1930s and guides debt restructuring, but recent interpretations cast uncertainty on its reach.

A revised act could affect other pending cases, including one between alternative investor Marblegate Asset Management LLC and for-profit educator Education Management Corp, which is partly owned by buyout firm KKR.

Caesars and Apollo declined to comment.

Much of Caesars' US$18 billion debt stems from its leveraged buyout, and the private equity firms involved have been accused of stripping the bankrupt unit of its best casinos and resorts.

Caesars' creditors include affiliates of private equity firm Centerbridge Partners, alternative investment manager group Oaktree Capital Management, and hedge fund Appaloosa Management.

The casino firm has argued that the lawsuits against its parent could push it into insolvency, and jeopardise a US$1.5 billion contribution to the reorganization of its bankrupt unit.

REUTERS