A recent American Lawyer story, “With $150M and Counting in Big Law Bills, Caesars Bankruptcy Approaches Finish Line,” reports that, the clock is ticking on a lucrative piece of work for lawyers at Jones Day, Kirkland & Ellis and Proskauer Rose as the $18 billion bankruptcy of Caesars Entertainment Corp.’s operating arm approaches a possible end.
Combined with Winston & Strawn, whose work for a court-appointed examiner in the case is finished, those four Am Law 100 firms have already billed $150 million for their time through September, the latest available report in the U.S. bankruptcy court docket in Chicago. All told, Las Vegas-based Caesars has spent more than $354 million on restructuring professionals and law firms from January 2015 through November 2016. By law, the debtor also pays the legal bills for most of its creditors.
Kirkland & Ellis, which represents Caesars Entertainment Operating Co., has billed more than $70 million in the case. Winston & Strawn charged nearly $32 million for its work. Proskauer, which represented a group of unsecured creditors, has billed around $25 million. And Jones Day, going to bat for a group of second-lien junior bondholders, has a tab of roughly $24 million, according to court filings.
For context, the fees represent between 3 to 4 percent of Kirkland’s, Proskauer’s and Winston & Strawn’s 2015 gross revenue, respectively. Jones Day’s fee requests represent a little more than 1 percent of the firm’s gross revenue that year.
But there may be an end in sight for Caesars’ legal bills. Following a tumultuous hearing in the Windy City, a confirmation hearing is set for Jan. 17 over a hard-fought plan for Caesars to exit Chapter 11 proceedings that began two years ago this month. The confirmation hearing, scheduled for two days, could bring to an end a complex bankruptcy fight that has drawn concessions from the private equity owners of Caesars; allegations that the bankrupt entity was looted before the filing; and still faces an objection from a representative overseeing the case from the U.S. Department of Justice’s Trustee Program.
Caesars bankruptcy emerged from the troubled private equity buyout of what was Harrah’s Entertainment Inc. in 2008 by Apollo Global Management LLC and TPG Capital Management LP. The deal, valued around $28 billion, was paid for mostly in debt.
After months of fighting to hold onto their stakes in Caesars, Apollo and TPG agreed in September to surrender equity valued at nearly $950 million in the proposed deal. The private equity firms were also pressured into concessions by claims from junior bondholders that Caesars transferred the ownership of more profitable properties out of its operating arm to create a “good Caesars,” the publicly traded Caesars Entertainment, and a “bad Caesars,” the bankrupt operating company.
Richard Davis, a former Weil, Gotshal & Manges partner known for his role in the Watergate prosecution, was appointed by the bankruptcy court to assess those claims. In his March 2016 report, Davis concluded that Caesars could be liable for damages ranging from $3.6 billion to $5.1 billion as a result of transactions that damaged the insolvent operating company. He charged a little more than $1.3 million for time and expenses, according to court records.
Caesars’ parent company eventually agreed to put more than $5 billion into its subsidiary’s restructuring plan as part of a deal that would shield it from suits by junior bondholders related to the pre-bankruptcy transactions. After months of wrangling, Caesars told the court in December that more than 90 percent of creditors approved of the deal, which it said is more than needed for a court to confirm the plan.
Unsecured creditors, represented by Proskauer, would receive 66 cents on the dollar, the company said in a September release. Junior bondholders, advised by Jones Day, would receive the same amount.
The confirmation hearing later this month will focus on the last objection to the plan’s approval, lobbed by the U.S. Trustee, which serves as a watchdog for bankruptcy cases. Among the trustee’s complaints is that the settlement provides an overbroad release from litigation claims related to the bankruptcy.
In court, Kirkland’s lawyers agreed to limit the confirmation hearing later this month to the trustee’s objections after initially planning a broader hearing that U.S. Bankruptcy Judge A. Benjamin Goldgar said would have taken nearly a month and could have resulted in him scuttling the plan.
After saying he was “distressed” by the prospect of such a long confirmation hearing and having to wait “a very long time” to issue a ruling, Goldgar left the full courtroom in the Chicago Loop and asked the lawyers for all parties to spend 30 minutes working out a solution.
It’s unclear what such a delay would have meant for the case or the company. In May, Caesars’ solvent parent company warned that it may also have to enter Chapter 11 if the case wasn’t resolved in a timely manner.
Jeffrey Zeiger, a Chicago-based complex litigation partner at Kirkland, assured the judge upon his arrival that the lawyers were prepared for a narrow confirmation ruling focusing on the trustee’s points. “It seems now that we really will have a brief and efficient hearing,” Goldgar said.