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Caesars to learn whether what happens in Delaware stays there

Caesars Entertainment Operating Co. will learn Wednesday whether its $20 billion restructuring bid will be heard in a bankruptcy court in Chicago, its chosen venue, or in Delaware, where creditors fighting the plan want the case to stay.

After half a day of sometimes rancorous argument between lawyers for the creditors and the company in federal court in Wilmington, Delaware, U.S. Bankruptcy Judge Kevin Gross scheduled a telephone hearing for 11 a.m. to announce his decision.

Parent Caesars Entertainment Corp. and its controlling shareholders, Apollo Global Management and TPG Capital, may have the most at stake in the choice of venue. Federal courts in Chicago use a looser standard for shielding non-bankrupt parent companies than those in Delaware.

One company lawyer, Paul Basta, asked Gross not to let his decision be influenced by accusations of wrongdoing against the parent in court and in several lawsuits. He compared the two sides to the football teams competing in the Super Bowl this Sunday.

The creditors claim to be “on the side of justice and we are on the side of evil,” Basta said. “The debtors are the Seahawks and we are Patriots,” he added, drawing laughter from the courtroom.

Creditors say the parent of the Las Vegas-based gambling company chose Chicago only because the courts there are more lenient about shielding non-bankrupt holding companies from liability associated with a reorganization.

Lawyers for Caesars say that was just one factor in its decision. They argued Tuesday that the relative ease of winning releases in Chicago will encourage the compromises necessary to reorganize and avoid years of litigation.

A group of lower-ranking creditors, represented by attorney Bruce Bennett, filed court papers to force the operating unit into bankruptcy on Jan. 12. Caesars filed its own petition in Chicago three days later. Under court rules Gross, as the judge overseeing the case that was filed first, will decide which court should handle the bankruptcy.

The company bypassed the court in its hometown of Las Vegas, which prompted creditor attorney Tom Lauria to end his argument with a paraphrase of the gambling center’s slogan:

“What happens in Wilmington, stays in Wilmington.”

The voluntary case is In re Caesars Entertainment Operating Co. Inc., 15-01145, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The involuntary case is In re Caesars Entertainment Operating Co., 15-10047, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Gross’s ruling may imperil some deals made with the senior creditors fewer than 90 days before the Wilmington filing. The Chicago filing came after the close of that 90-day window, when bankruptcy law makes challenging some agreements more difficult.