Supplier News
US – Caesars repositions ownership of four casinos
By Phil - 4 March 2014
As it looks to restructure its debt and brighten its balance sheet, Caesars Entertainment Corp has sold four casino properties to a separate unit that it controls for about US$1.8bn.
The sale of Bally’s Las Vegas, The Cromwell (formerly Bill’s Gamblin’ Hall & Saloon), The Quad and Harrah’s New Orleans to Caesars Growth Partners is valued by the company at about $US2.2bn, when debt and renovations at the Quad Resort & Casino are included.
Caesars Acquisition Co expects the deal to close in the second quarter. Caesars Entertainment and its affiliated companies will manage the purchased properties, allowing continued integration with the Total Rewards network and related synergies. The sale of Bally’s, The Cromwell, The Quad and Harrah’s New Orleans to Caesars Growth Partners preserves the network value of the four properties while enhancing liquidity at CEOC. The sale also includes a financial stake in the associated management fee stream. This asset sale will also facilitate new investment in these properties, some of which require considerable capital expenditures to realize their full potential as part of Caesars’ network at the center of the Las Vegas Strip.
“Since being taken private near the beginning of the global financial crisis, we have faced an incredibly challenging business environment and a highly leveraged capital structure. Despite these obstacles, we have invested significantly in the growth of our network and the enhancement of our assets while concurrently deploying a wide array of financial and operational tools to manage the company’s capital structure and create value,” said Gary Loveman, chairman and chief executive officer of Caesars Entertainment. “Entering 2014, I am very excited about our new customer offerings. Across our network, we have recently opened or will open promising new projects and amenities, such as The LINQ and High Roller and upgrades throughout Las Vegas. We also share in the economic benefits associated with Caesars Growth Partners, including considerable growth last year at Caesars Interactive Entertainment, through social and mobile games and the launch of real-money online gaming in Nevada and New Jersey.”
Caesars Entertainment today has a market capitalisation of approximately $3.5bn and is now comprised of three primary structures: Caesars Entertainment Resort Properties (CERP), its interest in Caesars Growth Partners, LLC (CGP), a joint venture in which Caesars Entertainment holds a 58 per cent economic interest, and CEOC. CERP is made up of six casino properties, predominantly in Las Vegas, as well as The LINQ development and the Octavius Tower at Caesars Palace.
Mr. Loveman added: “Today’s asset sales mark an important step in our ongoing efforts to repair CEOC’s balance sheet. Caesars Entertainment and Caesars Acquisition Company have a combined equity market capitalization of more than $5bn. To build equity value, we have employed a full complement of operating and financial tools. The toolbox, which includes cost management, working capital management, operational improvements, acquisitions, asset sales, credit agreement amendments, innovative operating strategies, exchange offers and equity raises, has helped to create two stable entities. The company expects to deploy a similar array of tools to improve CEOC’s financial position and build equity value.”
The announcement convinced Moody’s Investors Service to place Caesars Entertainment Operating Company’s ratings on review for downgrade. It said the sale would give the operator the cash it needs to fund its operating losses, but overall it was a negative move for its credit profile.
Moody’s said that given Caesars Entertainment Operating Co’s total debt load of almost $US21bn, a major reduction of debt was required to offset the lost income from the properties.
