Josh Kosman, "Caesars may sink because of allege $3B typo", New York Post 12/14/2015:
Leon Black’s Apollo Global Management is now defending itself against an alleged typo that could cost up to $3 billion. […]
Caesars in its 2008 debt agreement set conditions that would need to be met so it could strip the guarantee between the parent company and the gaming-operating subsidiary.
In the debt agreement, it says it can strip the gaming subsidiary’s guarantees if: A) it stopped being a subsidiary of the parent, B) the company transferred substantially all of its assets out of subsidiary, “AND” C) it essentially prepaid the bonds.
“There’s no way they satisfied all three conditions,” a source close to the case said, referring to when Caesars stripped the guarantee transferring some of its best assets to newly created divisions and put the subsidiary in bankruptcy.
Caesars claims it meant to say “OR.”
Ken Adams cited the actual contract language — "Caesars Might Have $450 Million Riding on an 'And'", 5/14/2014:
The Parent Guarantee shall terminate and be of no further force or effect and the Parent Guarantor shall be deemed to be released from all obligations under this Article XII upon:
(i) the Issuer ceasing to be a Wholly Owned Subsidiary of Caesars Entertainment;
(ii) the Issuer’s transfer of all or substantially all of its assets to, or merger with, an entity that is not a Wholly Owned Subsidiary of Caesars Entertainment in accordance with Section 5.01 and such transferee entity assumes the Issuer’s obligations under this Indenture; and
(iii) the Issuer’s exercise of its legal defeasance option or covenant defeasance option under Article VIII or if the Issuer’s obligations under this Indenture are discharged in accordance with the terms of this Indenture.
Ken quotes Matt Levine ("Caesars and the $450 Million 'And'", Bloomberg View 5/13/2014:
I don’t know what to tell you. As readers of words, those bondholders seem to be right. “The guarantee goes away upon X, Y and Z” does sound like you need X, Y and Z all to happen before the guarantee goes away. That’s just what “and” means.
On the other hand, the indenture obviously means to say “or.” It would make no sense to say that CEOC has to (i) stop being a wholly owned sub and (ii) merge into another company and (iii) pay off or defease all its debts for the guarantee to go away. Like, if CEOC paid off all its debts, but didn’t merge into another company, would Caesars still be obligated under the guarantee?
So this looks like a mistake, but the sort of mistake that a court probably wouldn’t read too literally. So I wouldn’t bet on the bondholders’ chances of challenging the de-guarantee-ification successfully.
Mistake, yes, but it seems implausible to me that this is a typo. Presumably whoever drafted this part of the contract had in mind the idea that there are three conditions under (any one of which) the guarantee would terminate, namely A, B, and C — which would make their mistake a failure to avoid ambiguity, not a typo.
Some web examples where and transparently has such an interpretation:
(link) The options correspond to a choice situation with three alternatives, A, B and C.
(link) In Figure 2, the model is illustrated for situations involving a choice between three alternatives (A1, A2, and A3), characterized by their values on two dimensions (labeled Q for performance quality and E for economy).
(link) Each of the three conditions (a), (b) and (c), taken by itself, is a necessary condition of bachelorhood.
(link) Historically, we legally give our names to another in three circumstances: marriage, birth and adoption.
(link) Besides myoblast fusion, physiological cell–cell fusion in mammals occurs in three circumstances: between the egg and the sperm during fertilization, during the differentiation of macrophages into osteoclasts and giant cells, and for the formation of syncytiotrophoblast during placenta formation.
Ken suggests that in such cases, the drafter should make the intent explicit:
Using just or works when occurrence of only one of the specified alternatives is feasible or desirable. But if you want to avoid having someone argue that occurrence of more than one of the specified alternatives precludes operation of the provision in question, then put the phrase one or more of the following before the specified alternatives and put and at the end of the penultimate alternative.
The fact that his sensible proposal chooses and to form the list seems to me to be an argument in favor of the idea that and can (ambiguously) have an effectively-disjunctive meaning in the original contract language.