Caesars Entertainment is hoping the possibility of a resort-scale casino in Toronto will persuade recalcitrant creditors to accept a plan to take its largest operating unit out of Chapter 11 bankruptcy.
Caesars Entertainment Operating Co. entered the protection of Chapter 11 in January 2015, buried under $18 billion of debt. In the 18 months since, bondholders with subordinate claims on CEOC have rejected several proposals by parent Caesars Entertainment to settle with them.
A U.S. Bankruptcy Court examiner has reported their claims could worth as much as $5.1 billion. Caesars is offering stock, cash and new debt it says is worth $4 billion.
The larger problem, however, is that some of the most prominent of these junior lenders believe that Caesars and its owners, private-equity giants Apollo Global Management and TPG Capital, transferred the group’s best-performing and least-indebted gaming assets into separate companies ahead of time to shield them from CEOC’s creditors, knowing they planned to place the subsidiary into Chapter 11. Caesars insists this is not true. Those denials notwithstanding, the company is in a position now where it could be looking at a Chapter 11 filing of its own if it cannot find a way to satisfy those lenders.
The bid in Toronto could figure significantly in this because Apollo and TPG are refusing demands by the junior lenders for a more generous settlement. Which means Caesars may have little left to bargain with beyond the offer of a larger equity stake in a parent company whose prospects would look a lot better with a new megaresort in the offing than they do now.
Caesars has been searching for a big new development since losing out on a Boston project. A casino in Canada’s largest city, which also would be the country’s largest and most elaborate, could mean hundreds of millions in annual profit.
Toronto voted in July 2015 to approve a resort-scale casino, and at least two development sites are under consideration. Caesars is one of at least six bidders, according to local news reports.
Yet, Caesars is just one of six bidders for the casino project. Others are Great Canadian Gaming, Penn National, Genting Group, Mohegan Sun, and Fallsview.
Caesars already owns and operates Casino Windsor in Ontario, among its 50 gaming properties.
Great Canadian owns and runs casinos in Nova Scotia, New Brunswick, Nanaimo, and Surrey, British Columbia. It also owns and operates a casino in Washington State, plus racetracks and resorts throughout Canada. Great Canadian is based in British Columbia, takes in some $60 million in annual revenues, and has more than 5,500 workers, making it the most formidable Canadian-based operator for Caesars’ Toronto casino bid.
Penn National Gaming owns and operates Casino Rama in Ontario, plus 16 casinos and three racetracks in the United States. With more than 16,000 employees and $2.5 billion in annual revenues, some analysts suggest Penn National might be the eventual winner in Toronto.
Fallsview Casino operates the OLG-owned Niagara Falls, Ontario casino, which is profitable. Yet, some analysts suggest it isn’t performing to its potential given its location in a popular tourist destination. The OLG also likely prefers leasing out the proposed Toronto casino, rather than entering into an operating agreement.
Malaysia-based Genting owns and operates 47 casinos around the globe. It takes in more than $5.8 billion per year and employs more than 58,000. What Genting does not have, though, is a Canadian operation.
Mohegan Sun owns and operates the popular namesake casino and resort in Connecticut, another in New York. The tribal-owned gaming firm, though, might face regulatory challenges in Canada and might have to partner with a tribe in Canada to secure the Toronto bid.
It’s also been reported that Toronto venture capitalist Graeme Roustan, who has been working for years to bring a second NHL team to the Toronto market, has been meeting with casino operators about partnering on a sports arena.
The Ontario Lottery and Gaming Corporation expects to announce a winner next summer, reports said.
