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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Caesars weighs layoffs, but Strip might be spared

13 November 2014

LAS VEGAS -- Caesars Entertainment Corporation expects to create an extra $250 million to $300 million in cash flow in 2015 through various cost-savings measures.

Much of the increase could come through expense reductions, such as layoffs and other efforts at the company. Caesars operates nearly 40 casinos in 15 U.S. states and Canadian provinces.

But one analyst speculated that a few of the cutbacks would come from Caesars’ nine resorts on or near the Strip.

Caesars is seeking to reduce its gaming-industry-high $22.8 billion in long-term debt. The company has held private talks with its banks and lenders since September.

Caesars Entertainment Chairman Gary Loveman, in prepared remarks on the company’s third-quarter conference call Monday, said the casino operator was “intensely focused on ensuring operating costs are aligned with the current environment to enhance (Caesars) profitability.”

The company reported a $908.1 million net loss in the quarter than ended Sept. 30.

“To that end, we are acting to reduce expenses and enhance (cash flow) across the company through a variety of initiatives in operations, marketing and corporate expenses,” Loveman said.

Analysts speculated Loveman’s comments on the conference call were in reference to a potential debt restructuring plan that includes a prearranged bankruptcy for Caesars’ largest unit as soon as January. Bloomberg News reported Caesars and key senior creditors have reached agreement on an outline of the plan.

Caesars delayed its quarterly earnings filing with the Securities and Exchange Commission on Monday because of the negotiations with banks and lenders.

‘LOT OF MOVING PARTS’

Fitch Rating Service gaming analyst Alex Bumazhny said Wednesday the pre-packaged bankruptcy plan “would be hard to execute given the complexity of the capital structure, the subjective nature of valuing the company and pending lawsuits” by the company’s unsecured creditors.

Bumazhny, who said previously Caesars would have to go through a bankruptcy to address its debt issues, thought the company was more likely to take that route given recent events.

“It will be a prolonged process, but it’s much more doable,” he said. “There are a lot of moving parts.”

Bumazhny said Caesars has undergone cost-cutting efforts over the years. But with the company’s Las Vegas properties out-performing Caesars resorts in regional gaming markets, he believes very few of the layoffs will be focused on the Strip, although there will be some staff reductions.

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

Loveman said Monday Caesars had a “generally good performance in Las Vegas” during the quarter.

Caesars corporate officials have declined comment on the company’s debt restructuring efforts.

Shares of Caesars, traded on the Nasdaq, closed Wednesday at $13.67, up $2.53 or 22.71 percent. Analysts said the company’s stock traded higher on news of the potential debt reorganization.

‘BURNING THROUGH CASH’

Caesars has three operating units that have been set up through various restructuring efforts. Caesars Entertainment Operation Co., own the largest portion of the company’s operating divisions, including Caesars Palace, Caesars Atlantic City, Harrah’s Reno and many of the company’s regional properties.

Casinos and properties held under Caesars Entertainment Operation 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, Bally’s Las Vegas, Planet Hollywood Resort, Harrah’s New Orleans, a 41 percent interest in Horseshoe Baltimore and Caesars Interactive Entertainment.

Analysts said Caesars Entertainment Operation “is burning through cash” and is the most likely candidate to be restructured through a bankruptcy.

In Las Vegas, Caesars recently raised their hotel resort fees to $25 per night at six properties — Bally’s, Flamingo, Harrah’s, the Linq, Paris and Planet Hollywood. A Caesars spokeswoman said in an email the increase was to “standardize” the resort fees across all properties.

In Atlantic City on Wednesday, Caesars announced it reached an agreement to sell the closed Showboat property on the Boardwalk to Stockton College of New Jersey, which plans to convert the hotel-casino into a branch campus. A price was not disclosed for the pending sale, which has a 28-acre location and the 1.4 million square foot building.

Caesars closed the Showboat on Aug. 31.
Caesars weighs layoffs, but Strip might be spared is republished from Online.CasinoCity.com.