Caesars Entertainment Inc. owes Detroit more than it owes its creditors.
And we all know what’s going on in Motor City.
In July, Detroit became the largest municipality in the United States to file for Chapter 9 bankruptcy protection when its $18 billion debt finally became too cumbersome.
Some analysts on Wall Street suggested that the largest casino operator in the United States could go down a similar path.
Caesars has $23.5 billion in long-term debt on its books, much of which came in 2008 when it was acquired by Apollo Global Management and TPG Capital in a $30.1 billion buyout.
The recession has wreaked havoc on casino operators across the country. Caesars, which has more than 50 casinos in 13 states, has come to the fore of the storm.
The company felt pressured at major destinations, especially in Atlantic City, which owns 10 resorts in or near Las Vegas, Streep, and operates a quarter of the 12 casino markets.
Despite the company’s moves to financially correct its stomach in recent years, Caesars is still succeeding. In 2012, the company raised nearly $8.6 billion in revenue, but suffered a net loss of $1.5 billion.
Results aside, the company’s debt is centralized. Earlier this year, Moody’s Investor Service called Caesars’ debt “unsustainable.” 파워볼게임
At a meeting of the Nevada Gaming Control Board in July, Caesars Vice President Michael Cohen acknowledged that the company’s debt is $10 billion higher than MGM Resorts International’s, but it is an affordable burden.
“We think it’s manageable, but others disagree,” Cohen said.
Caesars has taken a step further in controlling its debt by raising $1.18 billion, converting ownership of Planet Hollywood Resorts, Caesars’ interactive gaming division and the Baltimore casino under construction into a new publicly traded holding company.
Caesars Entertainment owns 57% of the newly named Caesars Acquisition Company and has the option to buy back the remaining 43% within three years. Caesars shareholders who chose to participate in the sale bought a share of the holding company for each share they owned in their parent company.
The problem is that new businesses that will raise money for Caesars’ development projects, such as new U.S. casinos and internet gaming opportunities, do little to mitigate the $23.5 billion hanging on the balance sheet.
“While the trading structure (and) conditions of the rights offering are complex and questions about Caesars’s capital structure are likely to persist, we believe the short-term bias of Caesars stockholders rises given the opportunity to own (a holding company) with a very attractive valuation,” Eyler Research Game analyst Adam Kreig told investors.
Regarding the aforementioned debt, Caesars announced a restructuring plan in September for at least $4 billion, which a company insider described as the “most important” concern in the investment world. The maturity date for that loan is approaching.
The company is securing new debt with maturities beginning in 2020, and is financing loans as part of a new strip project, including Caesars Palace’s 668-room Octavius Tower and the $550 million Lynk development under construction.
The sale of more than 10 million shares raised $200 million was part of a deal that reduced Apollo and TPG’s stake in Caesars from 70% to 64%.
On Tuesday, Caesars filed a 900-page document with the Securities and Exchange Commission explaining debt restructuring. It could help the financial world a little.
“Kicking the can down the street,” “Paying off for another day,” and “Refining the deck chairs of the Titanic” are idioms that can describe Caesar’s behavior.