Caesars' operating unit files for bankruptcy, but venue unclear

(Reuters) - The operating unit of Caesars Entertainment Corp, the largest U.S. casino company, filed for Chapter 11 bankruptcy on Thursday to implement its plan to cut $10 billion of debt, but faced an immediate challenge over where the case should proceed.

The company said it has the support of its senior noteholders to implement the plan, which will reduce the operating unit's debt to $8.6 billion from $18.4 billion.

The bankruptcy protection was filed by Caesars Entertainment Operating Company Inc (CEOC) and scores of affiliates in the U.S. Bankruptcy Court in Chicago.

Much of the debt is a legacy of the $30 billion leveraged buyout of Harrah's Entertainment that was led by Apollo Global Management and TPG Capital [TPG.UL] in 2008.

The deal ran into trouble almost immediately as the economy slid into a deep recession and gambling options proliferated in the United States to the point of saturation.

The bankruptcy filing culminates months of contentious negotiations and financial maneuvers that Caesars has said were aimed at freeing up cash for the operating unit.

Creditors opposed to the proposed restructuring have filed multiple lawsuits and accused the parent company and its private equity backers of looting the operating unit of choice assets such as the Linq complex in Las Vegas.

Leading the opposition are deep-pocketed hedge funds Appaloosa Management and Oaktree Capital Management, which have experience in the rough and tumble world of corporate debt workouts. They are among the holders of the $5 billion in junior notes that stand to recover less than 10 percent of what they are owed.

The junior noteholders on Monday filed an involuntary petition against the operating unit in the U.S. Bankruptcy Court in Wilmington, Delaware.

A judge on the Delaware court will hold an emergency hearing at 10:30 a.m. on Thursday to decide if the Chicago bankruptcy filing should be put on hold in favor of the Delaware case.

Under the plan, the operating unit will be split into a casino company and a publicly traded real estate investment trust.

Caesars Entertainment, Caesars Entertainment Resort Properties and Caesars Growth Partners, which are separate entities with independent capital structures, have not filed for bankruptcy relief, the casino company said in a statement.

Properties across the entire Caesars network are open and will operate without interruption throughout the reorganization process, the company said.

The case is in the U.S. Bankruptcy Court, Northern District of Illinois; Case no: 15-01143.

(Reporting by Supriya Kurane in Bengaluru and Tom Hals in in Wilmington, Delaware; Editing by Gopakumar Warrier Editing by Nick Zieminski)