Caesars Entertainment’s Vici Properties real estate investment trust will launch an initial public offering to help pay down debt and finance more acquisitions along the lines of the company’s recent deal with Caesars to buy Harrah’s Las Vegas.
Vici, created as part of the Chapter 11 reorganization of Caesars’ largest resort operating unit, will trade on the New York Stock Exchange under the symbol VICI, according to documents filed with the Securities and Exchange Commission.
A time frame for the IPO and the offering size had not been disclosed as of last week, although reports are that Vici will use a portion of the funds to pay down more than $4 billion of debt.
Created for the purpose of buying resort assets and leasing them back to their former owners to operate, REITs are an increasingly popular mechanism for companies looking to acquire existing casinos and/or develop new ones. Regional casino giant Penn National Gaming has spun off its resorts into publicly traded Gaming and Leisure Properties. MGM Resorts International has done the same with MGM Growth Properties, which went public last year. GLP owns 38 casinos, MGM Growth Properties, 12.
The Vici REIT was a key component of the bankruptcy settlement Caesars ultimately reached with holders of more than $18 billion of Caesars Entertainment Operating Co. debt. Creditors received shares in Vici, which currently owns 19 Caesars casino hotels in nine states.
Harrah’s Las Vegas, which Vici is leasing back to Caesars for $87.4 million a year, was purchased in December for $1.14 billion. Caesars used a portion of that to buy 18.4 acres of undeveloped land behind The Linq Hotel and Harrah’s for a $375 million convention center which in all likelihood will also be sold to Vici and leased for operational purposes.
Vici raised $1 billion in a private placement partly to fund the Harrah’s purchase, selling 54 million shares at a price of $18.50 each. The company now has some 300 million shares outstanding and a market cap of around $6 billion.
As it stands currently, Vici can count on $630 million a year in rental income, which will increase to $670 million in seven years, according to the SEC filing. But the company has incurred some $4 billion of debt in the three months since its creation. And the buying spree is far from over. Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin are all slated to be added to the portfolio.
Caesars, meanwhile, has completed another key portion of the bankruptcy settlement, merging 13 casinos belonging to Caesars Entertainment Resort Properties and Caesars Growth Properties into a new entity called Caesars Resorts Collection.
Caesars also is refinancing all of the debt incurred by the new company via a $5.7 billion senior secured credit facility consisting of a $4.7 billion term loan and $1 billion of revolving credit.
The merger and refinancing is expected to slash Caesars’ annual interest expense by $290 million a year, the company said.
