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Caesars Entertainment shares crater as bondholder lawsuits loom

Video slot machines at Caesars Palace in Las Vegas, Nevada.
George Rose | Getty Images
Video slot machines at Caesars Palace in Las Vegas, Nevada.

Shares of Caesars Entertainment briefly dropped more than 20 percent in Monday morning trade after a U.S. Bankruptcy Court ruling late Friday said the firm cannot protect itself from bondholder lawsuits.

The stock later recovered some of its losses and ended the day down 15 percent.

The cases seek some $11 billion in claims, which Caesars said could force it into bankruptcy protection. Its operating unit CEOC filed for bankruptcy protection in early 2015 and was asking for a third shield so its parent could contribute billions to a reorganization plan, Reuters said.

"Both Caesars Entertainment and CEOC are disappointed by the Bankruptcy Court's refusal to continue to stay the guarantee litigation against Caesars Entertainment," Caesars' spokesman Stephen Cohen said in an emailed statement to CNBC.

Caesars Entertainment 2-day performance (including premarket)

Source: FactSet

"Caesars Entertainment agreed to make a substantial contribution to CEOC to fund distributions to creditors under CEOC's reorganization plan, including the junior creditors in this guarantee litigation, enabling CEOC to emerge as expeditiously as possible," he said. "The Bankruptcy Court's refusal to continue to stay the guarantee litigation puts that contribution and the timeliness for resolution at serious risk."

A temporary restraining order by involved parties expires Monday. On Tuesday, Caesars faces a potential ruling in New York on lawsuits from bondholders, which allege the firm reneged on guarantees from bonds issued by the operating unit prior to its $18 billion bankruptcy filing.

Caesars appealed the restraining order on Monday, according to a filing with the U.S. Securities and Exchange Commission.

With Monday's decline, shares have fallen about 19 percent lower year-to-date, after plunging as much as 35 percent in premarket trade.

Reuters contributed to this report.