Caesars gambles on refinancing and online poker
Caesars Entertainment plans to refinance US$4.85 in debt in a move designed to shift assets in the event of a bankruptcy filing.
Bloomberg said the refinancing, consisting of a $3 billion term loan with a revolving credit facility and $1.85 billion of first- and second-lien notes and debentures, will be used to repurchase commercial mortgage-backed securities and a $450 million senior secured facility.
Fitch Ratings notes that the heavily leveraged casino giant, the largest in the US, is refinancing debt through the Caesars Entertainment Resort Properties at the PropCo unit, while most of its more than $23 billion in debt is held by the operating unit, known as the OpCo. It amounts to a shifting of equity interests in subsidiaries that own properties such as the Octavius Tower at Caesars Palace and “Project Linq” in Las Vegas to another unit, which will be an issuer under the new financing, according to a corporate filing.
“This was the next big maturity wall they had to address and it removes some of the overhang,” Fitch’s Alex Bumazhny told Bloomberg. “The overarching theme has been that the sponsors have found a way to solidify the PropCo entity, and to safeguard the online gaming assets, from a possible default at the operating company.”
Caesars is more than 70% controlled by Apollo Global Management and TPG Capital, which purchased it in 2008 for $30 billion in the biggest leveraged private-equity buyout in gaming industry history.
Octavius Tower at Caesars Palace
The company also is seeking to raise as much as $1.18 billion by offering shares in Caesars Acquisition Co., a new entity that will own stock in its online gaming business and two casinos in Las Vegas and the city of Baltimore in the US state of Maryland.
The online business finally took flight last month with the launch of a real-money poker site in Nevada marketed under the company’s World Series of Poker brand.
The launch makes Caesars the second operator to offer Internet poker in Nevada, one of three states (Delaware and New Jersey are the others) to legalize online gambling on an intrastate basis to avoid possible conflicts with federal law. Thus, Nevada law restricts the player pool to residents or participants physically present in the state, which has some major operators and analysts questioning the prospects, given the state’s relatively small population. Nevada also limits the game offering to poker. State officials, meanwhile, are reported to be in talks with their counterparts in other states aimed at establishing multi-state networks to increase the player base.
However, Mitch Garber, chief executive officer of Caesars Interactive Entertainment, says its profitability doesn’t depend on them.
“Nevada will have a very healthy business on its own,” he said.
Caesars Interactive Entertainment CEO Mitch Garber
Reports are that Caesars collected the names of thousands of prospective players at a recent WSOP tournament in Las Vegas and plans to market its site on television, billboards, banners and on room keys at its Nevada hotels. Plans also call for cross-promoting the site with Caesars’ nationwide Total Rewards player loyalty program. And unlike Ultimate Poker, controlled by Las Vegas locals giant Station Casinos, which launched the first site in Nevada in April, Caesars’ will offer Macfriendly compatibility.
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