The Caesars matter arose from the Chapter 11 reorganization of Caesars Entertainment Operating Company, Inc.—and its affiliated debtors (“CEOC” or the “Debtors”)—the principal operating subsidiary of one of the world’s largest casino-entertainment companies. CEOC filed for Chapter 11 in January 2015. In the years before the filing, CEOC had engaged in a series of transactions with its parent, its affiliates, and its private-equity sponsors; a court-appointed examiner later concluded that CEOC had become insolvent as early as 2008 and identified potential estate claims arising from those transactions valued at approximately $3.6 billion to $5.1 billion. The Debtors’ proposed plan of reorganization provided for a settlement contribution from the parent, its affiliates, its sponsors, and others (the “Contribution”)—valued by the Debtors’ financial advisor at approximately $5.8 billion—in exchange for releases of those claims (the “Claims”). The economic question was whether the Contribution fell within the Reasonable Range of Possible Litigation Outcomes for the Claims.
On behalf of the Debtors, Professor Mark E. Zmijewski—the Charles T. Horngren Professor of Accounting Emeritus at The University of Chicago Booth School of Business—submitted a declaration and expert report reviewing the Debtors’ Third Amended Joint Plan of Reorganization. He was asked to evaluate whether the value of the Contribution fell within the reasonable range of possible litigation outcomes for the Claims that would be released under the plan. Professor Zmijewski compared the $5.8 billion Contribution to estimates of the value of the Claims prepared by the examiner and by the interested parties, which ranged from as low as approximately $2.1–$2.9 billion to as high as approximately $8.1–$12.6 billion.