CITATION: Caesars Entertainment Operating Company, Inc. (Re), 2015 ONSC 712
COURT FILE NO.: CV-15-10837
DATE: 2015-01-30
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: IN THE MATTER OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT, R.S.C. 1985, c. C 36, AS AMENDED
AND IN THE MATTER OF THE CAESARS ENTERTAINMENT OPERATING COMPANY, INC. AND THE DEBTORS LISTED ON SCHEDULE “A” (COLLECTIVELY, THE “CHAPTER 11 DEBTORS”)
APPLICATION OF CAESARS ENTERTAINMENT WINDSOR LIMITED UNDER SECTION 46 OF THE COMPANIES’ CREDITORS ARRANGEMENT ACT
BEFORE: Regional Senior Justice G.B. Morawetz
COUNSEL: Katherine McEachern and Matthew Kanter, for Caesars Entertainment Operating Company, Inc. et al.
Robin B. Schwill, for the Ontario Lottery and Gaming Corporation
HEARD and ENDORSED: January 19, 2015
REASONS: January 30, 2015
ENDORSEMENT
INTRODUCTION AND FACTS
[1] On January 15, 2015, Caesars Entertainment Operating Company Inc. (“CEOC”) and certain of its subsidiaries (collectively, the “Chapter 11 Debtors”) commenced voluntary reorganization proceedings (the “Chapter 11 Proceeding”) in the United States Bankruptcy Court for the Northern District of Illinois (the “Illinois Court”) by each filing a voluntary petition for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101 – 1532 (the “Bankruptcy Code”).
[2] Caesars Windsor Entertainment Limited (“CEWL” or the “Applicant”), an Ontario corporation, is an indirect subsidiary of CEOC. CEWL is a Chapter 11 Debtor.
[3] Pursuant to a written resolution (the “Foreign Representation Resolution”) of its sole shareholder, Caesars World, Inc. (“Caesars World”) CEWL has been authorized to act as the foreign representative of all of the Chapter 11 Debtors for the purposes of recognizing the Chapter 11 Proceeding in Canada, and has been authorized to commence this Application for recognition of the Chapter 11 Proceeding as a foreign proceeding. CEOC has confirmed its authorization of CEWL to act as foreign representative on behalf of the Chapter 11 Debtors.
[4] CEWL manages Caesars Windsor Hotel and Casino in Windsor, Ontario (the “Windsor Casino”), for and on behalf of the Ontario Lottery and Gaming Corporation (“OLG”).
[5] In order to (a) ensure the protection of the Chapter 11 Debtors’ Canadian assets and (b) enable the Chapter 11 Debtors, including CEWL, to operate their businesses in the ordinary course during the Chapter 11 Proceeding, CEWL seeks the following orders pursuant to sections 44 and 49 of the Companies’ Creditors Arrangement Act, R.S.C., 1985 c. C-36 (the “CCAA”):
a. an “Initial Recognition Order,” inter alia: (i) declaring that CEWL is a “foreign representative” pursuant to section 45 of the CCAA; (ii) declaring that the Chapter 11 Proceeding is recognized as a “foreign main proceeding” under the CCAA; and (iii) granting a stay of proceedings against the Chapter 11 Debtors; and
b. a “Supplemental Order” pursuant to section 49 of the CCAA, inter alia: (i) recognizing in Canada and enforcing certain “first day” orders of the Illinois Court made in the Chapter 11 Proceeding (the “First Day Orders”); (ii) staying any claims, rights, liens or proceedings against or in respect of the Chapter 11 Debtors, the business and property of the Chapter 11 Debtors and the directors and officers of the Chapter 11 Debtors; and (iii) restraining the right of any person or entity to, among other things, discontinue or terminate any supply of products or services to the Chapter 11 Debtors.
[6] CEWL submits that the requested orders are necessary and appropriate in the circumstances of this case.
[7] On January 12, 2015, a competing involuntary petition in respect of CEOC was filed in the United States Bankruptcy Court for the District of Delaware (the “Delaware Court”). By order of the Delaware Court, the Chapter 11 Proceeding in the Illinois Court has been stayed pending a determination of the proper venue for the Chapter 11 case of CEOC and its subsidiaries (the “Delaware Stay Order”). However, as more fully detailed below, the Delaware Stay Order has permitted the Illinois Court to enter the First Day Orders. CEWL seeks recognition of these First Day Orders in order to ensure stability and the status quo pending the outcome of the venue dispute, and will return to this Court to advise of the outcome of that dispute and to seek any further orders as may be advisable or appropriate in the circumstances.
[8] The Chapter 11 Debtors are part of a geographically diversified casino-entertainment group of companies (collectively, “Caesars”) headed by Caesars Entertainment Corporation (“CEC”), a U.S. publicly traded company that owns, operates or manages 50 casinos in five countries in three continents, with properties in the United States, Canada, the United Kingdom, South Africa, and Egypt. CEC is not a Chapter 11 Debtor.
[9] CEC is the majority shareholder of CEOC, a Chapter 11 Debtor. The remaining Chapter 11 Debtors, including CEWL, are direct and indirect subsidiaries of CEOC. The Chapter 11 Debtors are the primary operating units of the Caesars gaming enterprise.
[10] On January 12, 2015, certain petitioning creditors filed an involuntary petition against CEOC under Chapter 11 of the Bankruptcy Code (but not as against the other Chapter 11 Debtors, including CEWL). That involuntary petition has not been resolved.
[11] Meanwhile, the Chapter 11 Debtors commenced their own voluntary proceedings in the Illinois Court on January 15, 2015. Hearings were conducted in both the Delaware Court and the Illinois Court on January 15, 2015, which have culminated in the entering of the Delaware Stay Order, and the First Day Orders.
[12] Notwithstanding the stay, the Delaware Court has permitted CEOC to obtain the First Day Orders from the Illinois Court, which are currently in effect pending litigation over the appropriate venue for the Chapter 11 case of CEOC and its subsidiaries. As such, while any further steps in the Chapter 11 Proceeding in the Illinois Court beyond the First Day Orders are currently stayed, the Applicant submits it is necessary to obtain recognition of the First Day Orders in Canada pending further developments in the Delaware Court. CEWL will advise the Court of any further developments in respect of the venue litigation, and will seek such further orders as may be advisable in the circumstances.
[13] CEWL is the only one of the 173 Chapter 11 Debtors that is not incorporated in the United States. It is a wholly-owned indirect subsidiary of CEOC.
[14] The almost exclusive function of CEWL is to manage the Windsor Casino pursuant to an operating agreement dated as of December 14, 2006 (the “Operating Agreement”) between Caesars Entertainment Windsor Holding, Inc. (now CEWL) and the Ontario Lottery and Gaming Corporation (“OLG”).
[15] CEWL supplies the management services set out in the Operating Agreement to OLG, in consideration for an operating fee. CEWL does not have an ownership interest in the Windsor Casino.
[16] CEWL operates the Windsor Casino under Caesars’ trademarks and branding. The trademarks have been licenced to OLG by Caesars World, a U.S.-based Chapter 11 Debtor and, in turn, sublicenced by OLG.
[17] CEWL’s primary assets in Canada consist of (a) its rights under the Operating Agreement and (b) cash on deposit from time to time in its corporate bank accounts.
[18] Windsor Casino Limited (“WCL”) is a wholly-owned subsidiary of CEWL. WCL employs the approximately 2,800 employees who work at the Windsor Casino. Certain of the WCL employees are unionized members of Unifor Local 444 (the “Union”). Neither CEWL nor WCL administers a defined benefit pension plan although WCL does administer a defined contribution pension plan. WCL is not a Chapter 11 Debtor and as such is not a subject of this Application.
[19] CEWL intends to operate the Windsor Casino pursuant to the Operating Agreement in the normal course through the Chapter 11 Proceeding. It is not currently contemplated that the Chapter 11 Debtors will restructure any of the business or operations of CEWL or WCL, or compromise any of their obligations.
[20] The Record establishes that the Chapter 11 Debtors, including CEWL, are managed from the United States as an integrated group from a corporate, strategic, financial, and management perspective. In particular:
a. pursuant the USD, CEWL’s corporate decision-making (including with respect to the Operating Agreement and the Chapter 11 Proceeding) is done by its sole shareholder, Caesars World, a Florida corporation;
b. the Chief Executive Officer and President of CEWL (who is resident in Windsor, Ontario), reports to the Chairman of the Board of CEWL (the “Chairman”). The Chairman, who is also an officer of CEOC, resides in the United States and works from the Caesars head office in Las Vegas, Nevada;
c. certain centralized services critical to CEWL’s functioning, including the administration of the Caesars brand and intellectual property rights, services related to online hotel booking, and administration of the loyalty “Total Rewards” program for customers are administered and handled from the United States;
d. the majority of the strategic marketing and communications decisions regarding the brand and loyalty programs are made, and related functions taken, on behalf of all Chapter 11 Debtors, including CEWL, in the United States;
e. management fees earned by CEWL under the Operating Agreement may be paid by way of dividend from time to time to CEWL’s U.S. corporate partners; and
f. strategic and directional decisions for CEWL are ultimately made in the United States.
[21] CEWL is party to a unanimous shareholder declaration (the “USD”) that grants CEWL’s sole shareholder, Caesar’s World, all the rights, powers and liabilities of the directors of CEWL. The Foreign Representation Resolution authorized CEWL to file as a Chapter 11 Debtor and to act as the foreign representative of all of the Chapter 11 Debtors for the purposes of recognizing the Chapter 11 Proceeding in Canada. By letter dated January 16, 2015, CEOC confirmed CEWL’s authorization to act as foreign representative for the Chapter 11 Debtors.
ISSUES
[22] The issues on this Application are:
a. Should this Court recognize the Chapter 11 Proceeding as a foreign main proceeding pursuant to sections 46 through 48 of the CCAA and grant the Initial Recognition Order sought by the Applicant?
b. Should this Court grant the Supplemental Order sought by the Applicant under section 49 of the CCAA?
ANALYSIS
[23] Subsection 46(1) of the CCAA provides that a foreign representative may apply to the Court for recognition of a foreign proceeding in respect of which he or she is a foreign representative.
[24] CEWL has been authorized to act as foreign representative of the Chapter 11 Debtors pursuant to the Foreign Representative Resolution executed by CEWL’s sole shareholder. CEOC, for itself and on behalf of its subsidiaries, has written to CEWL confirming its authorization to act as foreign representative of the Chapter 11 Debtors. It is CEWL’s position that this authorization is sufficient for purposes of subsection 45(1) of the CCAA.
[25] There is no language in Part IV of the CCAA that requires a foreign representative to be appointed by order of the court in the foreign proceeding.
[26] I accept that for the purposes of this application that CEWL is a “foreign representative”.
[27] In response to an application brought by a foreign representative under subsection 46(1) of the CCAA, subsection 47(1) of the CCAA provides that the Court shall grant an order recognizing the foreign proceeding if the proceeding is a foreign proceeding and the applicant is a foreign representative in respect of that proceeding.
[28] Canadian courts have consistently held that court proceedings under chapter 11 of the Bankruptcy Code constitute “foreign proceedings” for the purposes of the CCAA (see: Re Digital Domain Media Group Inc., 2012 BCSC 1565 (B.C.S.C. [In Chambers]) at para. 15; and Re Lightsquared LP, 2012 ONSC 2994, 92 C.B.R. (5th) 321 (Ont. S.C.J. [Commercial List]) at para. 18). I am satisfied that the Chapter 11 Proceeding is a “foreign proceeding”.
[29] CEWL submits that it is appropriate for this Court to recognize the Chapter 11 Proceeding as a foreign main proceeding.
[30] If the foreign proceeding is recognized as a foreign main proceeding, there is an automatic stay provided in section 48(1) of the CCAA against proceedings concerning the debtor’s property, debts, liabilities or obligations and prohibitions against selling or disposing of property in Canada.
[31] Subsection 45(1) of the CCAA provides that a “foreign main proceeding” is a foreign proceeding in the jurisdiction of the debtor company’s centre of main interests (“COMI”).”
[32] For the purposes of Part IV of the CCAA, in the absence of proof to the contrary, a debtor company’s registered office is deemed to be the COMI.
[33] In Lightsquared, the Court found that the following principal factors, considered as a whole, will tend to indicate whether the location in which the proceeding has been filed is the debtor’s COMI:
a. the location is readily ascertainable by creditors;
b. the location is one in which the debtor’s principal assets or operations are found; and
c. the locations where the management of the debtor takes place.
(see: Re Lightsquared, supra at para. 25; and Re Mt.Gox Co., 2014 ONSC 5811, 245 A.C.W.S. (3d) 280 (Ont. S.C.J. [Commercial List]) at para. 21)
[34] While CEWL is incorporated in Ontario and has its registered head office in Ontario, the Applicant submits that Ontario is not its centre of main interests.
[35] I am satisfied that the COMI for the Chapter 11 Debtors is the United States. In arriving at this decision, I have taken into account that CEWL is the only Chapter 11 Debtor that is not incorporated in a U.S. jurisdiction. All of the other 172 Chapter 11 Debtors have their head office or headquarters located in the United States. In addition:
a. the Chapter 11 Debtors operate as an functionally integrated group from a corporate, strategic, financial and management perspective;
b. pursuant to the USD, CEWL’s corporate decisions are made by its sole shareholder, Caesars World, a Florida corporation;
c. CEWL’s Chief Executive Officer and President report to the Chairman, who resides in the United States and works from the Caesars head office in Las Vegas, Nevada;
d. centralized services critical to CEWL’s operations, including the administration of the Caesars brand and intellectual property rights, services related to online hotel booking, the Windsor Casino website, and administration of the “Total Rewards” loyalty program are operated from the United States;
e. strategic and directional decisions for CEWL are ultimately made in the United States.
[36] In the result, I am satisfied that the Chapter 11 Proceeding should be recognized as a “foreign main proceeding”.
[37] The relief requested in the Initial Recognition Order is granted.
[38] In the context of cross-border insolvencies, Canadian courts have consistently encouraged comity and cooperation between courts in various jurisdictions in order to enable enterprises to restructure on a cross-border basis (see: Re Lear Canada (2009), 2009 ON SC 37931, 55 C.B.R. (5th) 57, 2009 CarswellOnt 4232 (Ont. S.C.J. [Commercial List]) at paras. 11 and 17; and Re Babcock & Wilcox Canada Ltd. (2000), 2000 ON SC 22482, 18 C.B.R. (4th) 157, 2000 CarswellOnt 704 (Ont. S.C.J. [Commercial List]) at para. 9).
[39] Having reviewed the Record, I am satisfied, based on the facts in Mr. James Smith’s affidavit and for the reasons set out in the Applicant’s factum, that it is appropriate for the Court in this case to exercise its authority under sections 49(1) and 50 of the CCAA to grant the relief sought in the Supplemental Order, in order to maintain the status quo and protect the assets of the Chapter 11 Debtors, while permitting CEWL to continue operating its business as usual in Canada during the Chapter 11 Proceeding.
DISPOSITION
[40] In the result, the Application is granted. The Initial Recognition Order and the Supplemental Order have been signed, with the Supplemental Order having been modified to exclude a stay of actions against directors and officers of the Chapter 11 Debtors, as I consider such requested relief to be beyond the scope of appropriate relief in the Supplemental Order at this time.
RSJ G.B. Morawetz
Date: January 30, 2015
SCHEDULE “A”
LIST OF CHAPTER 11 DEBTORS
Legal Name
State of Formation
CZL Development Company, LLC
Delaware
Harrah's Iowa Arena Management, LLC
Delaware
PHW Manager, LLC
Nevada
190 Flamingo, LLC
Nevada
AJP Holdings, LLC
Delaware
AJP Parent, LLC
Delaware
B I Gaming Corporation
Nevada
Bally’s Midwest Casino, Inc.
Delaware
Bally’s Park Place, Inc.
New Jersey
Benco, Inc.
Nevada
Biloxi Hammond, LLC
Delaware
Biloxi Village Walk Development, LLC
Delaware
BL Development Corp.
Minnesota
Boardwalk Regency Corporation
New Jersey
Caesars Entertainment Canada Holding, Inc.
Nevada
Caesars Entertainment Finance Corp.
Nevada
Caesars Entertainment Golf, Inc.
Nevada
Caesars Entertainment Retail, Inc.
Nevada
Caesars India Sponsor Company, LLC
Nevada
Caesars Marketing Services Corporation (f/k/a Harrah's Marketing Services Corporation)
Nevada
Caesars New Jersey, Inc.
New Jersey
Caesars Palace Corporation
Delaware
Caesars Palace Realty Corporation
Nevada
Caesars Palace Sports Promotions, Inc.
Nevada
Caesars Riverboat Casino, LLC
Indiana
Caesars Trex, Inc.
Delaware
Caesars United Kingdom, Inc.
Nevada
Caesars World Marketing Corporation
New Jersey
Caesars World Merchandising, Inc.
Nevada
Caesars World, Inc.
Florida
California Clearing Corporation
California
Casino Computer Programming, Inc.
Indiana
Chester Facility Holding Company, LLC
Delaware
Consolidated Supplies, Services and Systems
Nevada
DCH Exchange, LLC
Nevada
DCH Lender, LLC
Nevada
Desert Palace, Inc.
Nevada
Durante Holdings, LLC
Nevada
East Beach Development Corporation
Mississippi
GCA Acquisition Subsidiary, Inc.
Minnesota
GNOC, Corp.
New Jersey
Grand Casinos of Biloxi, LLC (f/k/a Grand Casinos of Mississippi, Inc. - Biloxi)
Minnesota
Grand Casinos of Mississippi, LLC—Gulfport
Mississippi
Grand Casinos, Inc.
Minnesota
Grand Media Buying, Inc.
Minnesota
Harrah South Shore Corporation
California
Harrah's Arizona Corporation
Nevada
Harrah's Bossier City Investment Company, L.L.C.
Louisiana
Harrah's Bossier City Management Company, LLC
Nevada
Harrah's Chester Downs Investment Company, LLC
Delaware
Harrah's Chester Downs Management Company, LLC
Nevada
Harrah's Illinois Corporation
Nevada
Harrah's Interactive Investment Company
Nevada
Harrah's International Holding Company, Inc.
Delaware
Harrah's Investments, Inc. (f/k/a Harrah's Wheeling Corporation)
Nevada
Harrah's Management Company
Nevada
Harrah's MH Project, LLC
Delaware
Harrah's NC Casino Company, LLC
North Carolina
Harrah's North Kansas City LLC (f/k/a Harrah's North Kansas City Corporation)
Missouri
Harrah's Operating Company Memphis, LLC
Delaware
Harrah's Pittsburgh Management Company
Nevada
Harrah's Reno Holding Company, Inc.
Nevada
Harrah's Shreveport Investment Company, LLC
Nevada
Harrah's Shreveport Management Company, LLC
Nevada
Harrah's Shreveport/Bossier City Holding Company, LLC
Delaware
Harrah's Shreveport/Bossier City Investment Company, LLC
Delaware
Harrah's Southwest Michigan Casino Corporation
Nevada
Harrah's Travel, Inc.
Nevada
Harrah's West Warwick Gaming Company, LLC
Delaware
Harveys BR Management Company, Inc.
Nevada
Harveys C.C. Management Company, Inc.
Nevada
Harveys Iowa Management Company, Inc.
Nevada
Harveys Tahoe Management Company, Inc.
Nevada
H-BAY, LLC
Nevada
HBR Realty Company, Inc.
Nevada
HCAL, LLC
Nevada
HCR Services Company, Inc.
Nevada
HEI Holding Company One, Inc.
Nevada
HEI Holding Company Two, Inc.
Nevada
HHLV Management Company, LLC
Nevada
Hole in the Wall, LLC
Nevada
Horseshoe Entertainment
Louisiana
Horseshoe Gaming Holding, LLC
Delaware
Horseshoe GP, LLC
Nevada
Horseshoe Hammond, LLC
Indiana
Horseshoe Shreveport, L.L.C.
Louisiana
HTM Holding, Inc.
Nevada
Koval Holdings Company, LLC
Delaware
Koval Investment Company, LLC
Nevada
Las Vegas Golf Management, LLC
Nevada
Las Vegas Resort Development, Inc.
Nevada
Martial Development Corp.
New Jersey
Nevada Marketing, LLC
Nevada
New Gaming Capital Partnership
Nevada
Ocean Showboat, Inc.
New Jersey
Players Bluegrass Downs, Inc.
Kentucky
Players Development, Inc.
Nevada
Players Holding, LLC
Nevada
Players International, LLC
Nevada
Players LC, LLC
Nevada
Players Maryland Heights Nevada, LLC
Nevada
Players Resources, Inc.
Nevada
Players Riverboat II, LLC
Louisiana
Players Riverboat Management, LLC
Nevada
Players Riverboat, LLC
Nevada
Players Services, Inc.
New Jersey
Reno Crossroads LLC
Delaware
Reno Projects, Inc.
Nevada
Rio Development Company, Inc.
Nevada
Robinson Property Group Corp.
Mississippi
Roman Entertainment Corporation of Indiana
Indiana
Roman Holding Corporation of Indiana
Indiana
Showboat Atlantic City Mezz 1, LLC
Delaware
Showboat Atlantic City Mezz 2, LLC
Delaware
Showboat Atlantic City Mezz 3, LLC
Delaware
Showboat Atlantic City Mezz 4, LLC
Delaware
Showboat Atlantic City Mezz 5, LLC
Delaware
Showboat Atlantic City Mezz 6, LLC
Delaware
Showboat Atlantic City Mezz 7, LLC
Delaware
Showboat Atlantic City Mezz 8, LLC
Delaware
Showboat Atlantic City Mezz 9, LLC
Delaware
Showboat Atlantic City Operating Company, LLC
New Jersey
Showboat Atlantic City Propco, LLC
Delaware
Showboat Holding, Inc.
Nevada
Southern Illinois Riverboat/Casino Cruises, Inc.
Illinois
Tahoe Garage Propco, LLC
Delaware
TRB Flamingo, LLC
Nevada
Trigger Real Estate Corporation
Nevada
Tunica Roadhouse Corporation (f/k/a Sheraton Tunica Corporation)
Delaware
Village Walk Construction, LLC
Delaware
Winnick Holdings, LLC
Delaware
Winnick Parent, LLC
Delaware
3535 LV Corp. (f/k/a Harrah's Imperial Palace)
Nevada
Caesars License Company, LLC (f/k/a Harrah's License Company, LLC)
Nevada
FHR Corporation
Nevada
FHR Parent, LLC
Delaware
Flamingo-Laughlin Parent, LLC
Delaware
Flamingo-Laughlin, Inc. (f/k/a Flamingo Hilton-Laughlin, Inc.)
Nevada
Harrah's New Orleans Management Company
Nevada
LVH Corporation
Nevada
Parball Corporation
Nevada
Caesars Escrow Corporation (f/k/a Harrah's Escrow Corporation)
Delaware
Caesars Operating Escrow LLC (f/k/a Harrah's Operating Escrow LLC)
Delaware
Corner Investment Company Newco, LLC
Delaware
Harrah's Maryland Heights Operating Company
Nevada
BPP Providence Acquisition Company, LLC
Delaware
Caesars Air, LLC
Delaware
Caesars Baltimore Development Company, LLC
Delaware
Caesars Massachusetts Acquisition Company, LLC
Delaware
Caesars Massachusetts Development Company, LLC
Delaware
Caesars Massachusetts Investment Company, LLC
Delaware
Caesars Massachusetts Management Company, LLC
Delaware
CG Services, LLC
Delaware
Christian County Land Acquisition Company, LLC
Delaware
CZL Management Company, LLC
Delaware
HIE Holdings Topco, Inc.
Delaware
PH Employees Parent LLC
Delaware
PHW Investments, LLC
Delaware
Caesars Entertainment Operating Company, Inc. (f/k/a Harrah's Operating Company, Inc.)
Delaware
Caesars Entertainment Windsor Limited (f/k/a Caesars Entertainment Windsor Holding, Inc.)
Canada
Octavius Linq Holding Co., LLC
Delaware
Caesars Baltimore Acquisition Company, LLC
Delaware
Caesars Baltimore Management Company, LLC
Delaware
PHW Las Vegas, LLC
Nevada
3535 LV Parent, LLC
Delaware
Bally's Las Vegas Manager, LLC
Delaware
Cromwell Manager, LLC
Delaware
JCC Holding Company II Newco, LLC
Delaware
Laundry Parent, LLC
Delaware
LVH Parent, LLC
Delaware
Parball Parent, LLC
Delaware
The Quad Manager, LLC
Delaware
Des Plaines Development Limited Partnership
Delaware