Author Home Author Archives Search Articles Subscribe
Stay informed with the
NEW Casino City Times newsletter!
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Related Links
Related News
Recent Articles
Best of Howard Stutz
Howard Stutz

Caesars announces debt plan to retire more than $4 billion in obligations

19 September 2013

LAS VEGAS -- Caesars Entertainment Inc. announced a debt restructuring plan Wednesday that will retire more than $4 billion of the casino operator’s financial obligations that are coming due later this year.

If the company is success­ful through the public markets, analysts said the new debt, with a new and longer maturity date, would remove an obligation that was causing some in the investment community to speculate that Caesars might have to file a bankruptcy reorganization.

Caesars is backing the new loans with the 668-room Octavius Tower at Caesars Palace, which opened in January 2012, and the $550 million Linq development on the Strip, which is expected to open in February. The Linq includes 300,000 square feet of outdoor retail, dining and entertainment attractions, and the 550-foot High Roller observation wheel.

The company could raise as much $4.85 billion through bonds and new loans.

In a filing with the Securities and Exchange Commission, Caesars said several of its lenders had agreed to the offer to retire the older debt and issue new bonds that include the backing of the company’s two projects.

Caesars declined comment on the transaction. A company financial source, who is familiar with the deal but not authorized to speak on behalf of Caesars, said the $4 billion of debt was the most significant and the “imminent maturity” of the company’s long-term debt.

Caesars had $23.5 billion in long-term debt as of June 30, the largest in the gaming industry. Private equity groups Apollo Global Management LLC and TPG Capital took Caesars, then known as Harrah’s Entertainment, private in 2008 in a $30.1 billion transaction. The companies still control 70 percent of Caesars Entertainment.

Investors initial response to the transaction was negative as shares of Caesars were down as much as 11 percent on Nasdaq Global Select on Wednesday morning.

Shares of the company closed at $23.39, down $2.54 or 9.80 percent, amid a broad market rally.

Wells Fargo Securities gaming analyst Dennis Farrell Jr. said his view of Caesars didn’t change with the re­financing plans.

“We remain uncomfortable with the operating company’s leverage and interest coverage profile and the prospect of increased gaming competition throughout many segments of Caesars portfolio,” Farrell told investors.

Caesars, which operates 10 resorts on or near the Strip and more than 50 casinos and resorts across the U.S., has faced a multitude of criticism this year over the company’s large debt.

Moody’s Investors Service called the debt “unsustainable” in April. The company reported a $212.2 million net loss in the second quarter that ended June 30.

RBC Capital Markets gaming analyst John Kempf said Wednesday the debt refinancing was anticipated by investors, but he viewed the news “as a slight negative.”

Kempf said he expects the company’s free cash flow to decline somewhat because of the higher borrowing costs.

“The second reason deals primarily with perception,” Kempf said, in reference to the Octavius Tower and Linq.
Caesars announces debt plan to retire more than $4 billion in obligations is republished from