David Tepper — this year’s top-paid hedge fund manager — is preparing to sue Caesars Entertainment for allegedly trying to avoid paying its loans, The Post has learned.
“There will be a legal fight,” a banker said.
The heavyweight bout would pit Tepper against Leon Black’s Apollo Global Management and TPG Capital, which own the nation’s largest casino chain.
Tepper’s Appaloosa Management, Canyon Capital and Oaktree Capital Management are leading a group of junior debtholders, who plan to file an injunction to stop Caesars from selling four of its casinos to another Caesars-owned entity for $2.2 billion.
Caesars Entertainment said some proceeds could be used to reduce its nearly $20 billion in debt.
Tepper and his bond group argue that money-losing Caesars Entertainment cannot use sales proceeds for anything besides paying creditors since it is essentially bankrupt, and this is an illegal transfer of assets, sources said.
Caesars Entertainment reported Wednesday that it lost $386 million last quarter, up from a loss of $218 million in the year ago period.
The gaming company reported that as of March 31 it still had $1.18 billion in liquidity.
Caesars owns six Atlantic Coast casinos including four in Atlantic City, and reported net revenue for all six had fallen 14 percent to $315 million, a $50 million loss.
The company is weighing the possibility of closing one of its four Atlantic City casinos — Caesars, Bally’s, Harrah’s and Showboat — it said on a conference call Wednesday.
Tepper’s firm believes a Caesars suit would be similar to a 2012 case involving utility Dynegy, in which Carl Icahn owned a leading stake, a knowledgeable source said.
A bankruptcy court examiner found Dynegy likely transferred billions of dollars of assets illegally to newly created businesses to restructure its debts.
Three months after the transfer a relatively small part of Dynegy filed for bankruptcy.
Creditors and Dynegy reached a deal after the ruling, and creditors got equity in the healthy Dynegy.
“These are similar antics,” the source said.
“Many [creditors] have positions, evidenced by $27 billion in outstanding credit default swaps, which motivate them to bet against its future success,” a Caesars spokesman said.
Caesars has made these recent moves because its growth initiatives — especially online poker — are falling short of revenue expectations, the banker said.
In November, New Jersey became the third state to launch online gaming. But it has raised only $34 million in tax revenue, well short of its annual goal of nearly $200 million.
Caesars last year split itself into two, selling some of its assets not pledged to bondholders to the newly created Caesars Growth Partners, for more than $875 million.
Appaloosa did not return calls for comment.