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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Caesars to trim nationwide workforce by less than 1 percent

14 November 2014

LAS VEGAS -- Casino giant Caesars Entertainment Corporation attempted to clarify planned cost-saving measures Thursday, saying it will reduce its 68,000-person workforce nationwide by less than 1 percent.

The company, which operates nearly 40 casinos in 14 U.S. states and the Canadian province of Ontario, is attempting to restructure its gaming industry-high $22.8 billion debt.

The company has held private talks with its banks and lenders since September and is reportedly planning a prearranged bankruptcy filing for Caesars’ largest unit as soon as January.

Caesars said this week it hopes to create an extra $250 million to $300 million in cash flow next year through various cost-savings measures.

In a statement Thursday, Caesars spokesman Gary Thompson said the company would eliminate jobs but the numbers would be small.

“As part of the company’s ongoing efforts to ensure operating costs are aligned with the current environment, we are acting to reduce expenses across the company through a variety of initiatives in operations, marketing and corporate expenses,” Thompson said. “Among the initiatives are enterprisewide job reductions that account for less than 1 percent of the company’s work force.”

In Nevada, where the company operates 14 hotel-casinos in Las Vegas, Reno, Lake Tahoe and Laughlin, Caesars employs roughly 20,000 workers.

Fitch Ratings Service gaming analyst Alex Bumazhny speculated that few of the cutbacks would come from Caesars’ nine resorts on or near the Strip. The company’s Strip operations “had a generally good performance” during the third quarter.

“There is not much more upside from cutting back in Las Vegas,” Bumazhny said.

News of the potential bankruptcy restructuring kept investors enthused about Caesars on Thursday. Shares of the company increased $2.84, or 20.78 percent, to close at $16.51 on the Nasdaq. A day earlier, Caesars shares rose 22.71 percent.

Analysts said Caesars Entertainment Operation Co., one of the company’s operating divisions, “is burning through cash” and is the most likely candidate to be restructured through a bankruptcy.

Caesars has carried the debt since 2008, when the company was acquired by two private equity firms in a leveraged buyout.

Gaming analysts continued to question how a bankruptcy filing for Caesars would be structured.

Kim Noland, director of high yield research at Gimme Credit, an independent research service on corporate bonds, said Thursday the issue that concerns second lien bondholders — Caesars’ transfer of various hotel-casino properties into different affiliated management divisions — doesn’t seem to go away through a restructuring.

“We wonder therefore how the asset transfers pass the ‘red face’ test but figure bond trading prices are indication that some junior creditors are simply voting with their feet,” Noland wrote in a research note. “An agreement by all creditor classes, as difficult as that may be to achieve, likely would not reverse the asset transfers nor would it revive the parent company guarantee that formerly protected bondholders at the subsidiary.”

Caesars Entertainment Operation owns the largest portion of the company’s resorts, including Caesars Palace, Caesars Atlantic City, Harrah’s Reno Casino and Hotel and many of the company’s regional properties.

The properties also owe about 80 percent of the company’s overall debt.

Caesars’ other major operating division is Caesars Growth Partners, which is publicly traded on Nasdaq as Caesars Acquisition Co.

The business, 58 percent owned by Caesars Entertainment, includes The Cromwell, The Linq Hotel & Casino, Bally’s - Las Vegas, Planet Hollywood Resort & Casino, Harrah’s New Orleans Casino, a 41 percent interest in The Horseshoe Casino Baltimore and Caesars Interactive Entertainment.
Caesars to trim nationwide workforce by less than 1 percent is republished from Online.CasinoCity.com.