Worried Investors

Although they were unsuccessful, some investors are worried that the companies could try to insert another version of the amendments into the U.S. government's spending bill that needs to be passed by Dec. 11, the people said.

The companies' “sole aim is to overturn several federal district court decisions that were not in their favor,” Andrew Milgram, managing partner of Marblegate Asset Management, said in a statement Monday. His firm won a court case against Education Management and could be affected by a change in the rules. The U.S. Court of Appeals for the Second Circuit has agreed to hear the company's appeal of the ruling. “We strongly urge Congress to leave out the erroneous Trust Indenture Act provision in the omnibus bill,” he said.

The proposed amendments would have killed two key provisions in the existing law that limit what companies can do to modify their debt without having creditors demanding to collect on it, said Julia Winters, a legal analyst at Bloomberg Intelligence.

The changes would have made it more difficult for minority bondholders to challenge actions companies take in restructurings, according to a Dec. 4 research note by Winters and Bloomberg Intelligence analyst Philip Brendel.

Under the proposal, creditors would be protected by law only if a company reduced principal amounts, interest rates or maturity dates, according to a copy of the draft amendment published by Politico. If a company changed those attributes, bondholders would have the right to get paid back in full.

The Wall Street Journal reported earlier on Caesars' lobbying efforts.

Bloomberg News