Creditors Try to Block Caesars Restructuring

Jan 12 (Reuters) - A group of second-lien bondholders of casino operator Caesars Entertainment Corp filed a petition for involuntary Chapter 11 bankruptcy protection against the company's largest unit after it defaulted on interest payments.

Caesars Entertainment Operating Co Inc defaulted on $225 million of payments due on Dec. 15.

The petitioning group includes hedge funds Appaloosa Investment Limited Partnership I and OCM Opportunities Fund VI LP, according to the petition filed on Monday.

The payments were due on principal of $4.5 billion.

The company elected not to pay the interest though it had about $1.5 billion of cash and cash equivalents and said it was taking advantage of a grace period, the bondholders said.

Caesars Entertainment Corp intends to file for bankruptcy for the unit by Jan. 20 and split into two companies.

The company said on Friday it had garnered enough support from key creditors to carry out its $18.4 billion debt restructuring plan for the unit.

Two-thirds support from first-lien noteholders has given the company the required backing to enforce its bankruptcy plan on those creditors who oppose it.

The casino operator has been weighed down with debt from a $29 billion leveraged buyout in 2008 by TPG Capital and Apollo Global Management.

The company's restructuring plan aims to reduce the debt associated with the unit to $8.6 billion from $18.4 billion.

Caesars shares were down 2.2 percent at $13.52 in early trading on the Nasdaq on Monday.