Caesars to Restructure $23 Billion in Debt

A subsidiary of Caesars Entertainment Corp. is working with investment bank Lazard Ltd. to restructure $23 billion in long-term debt. The massive debt load is a record for the industry and inhibits the company’s efforts at expansion.

Shares fell on news of the restructuring

With no formal announcement, Las Vegas-based casino company Caesars Entertainment retained the services of investment bank Lazard Ltd., reportedly to help it restructure a crushing $23 billion in long-term debt. Share prices fell shares declined 3.7 percent to $21.81 on the news February 10.

Analysts had mixed reactions to the reports, according to the Las Vegas Review-Journal.

“Why now? There is nothing new in Caesars capital structure that would suggest an immediate need to restructure,” KDP Investment Advisors gaming analyst Barbara Cappaert said in a research note.

But John Kempf of RBC Capital Markets said it’s about time Caesars dealt with its debt, which resulted from declining revenues, low liquidity and fallout from the Great Recession. “We all think that this is coming sooner rather than later,” he told Bloomberg News.

The company, with hubs in Las Vegas and Atlantic City, has more than 40 properties in the United States, including 10 on or near the Las Vegas Strip. Caesars also owns the World Series of Poker. It hasn’t posted a profit since late 2009. Its inability to attain a license in Macau has been viewed as one reason it remains in the red.

Sources said Lazard was brought on to deal specifically with Caesars Acquisition Co., a publicly traded subsidiary of the company created last fall. Caesars Acquisition controls part of Caesars’ interactive gaming business as well as two casinos, Planet Hollywood in Las Vegas and the Horseshoe Baltimore, soon to open in the Maryland waterfront city.

Caesars went private in a 2008 leveraged buyout led by Apollo Global Management and TPG Capital, reported the Review-Journal.  Since 2012, it has offered public stock sales, bought back debt at a discount, and moved assets among its subsidiaries. A restructuring of its Caesars Entertainment Operating Co. unit, which holds the bulk of its properties and debt, is seen as the next step in that process, Kempf said.

Last September, Caesars revealed plans to raise about $4.4 billion to refinance its commercial mortgage-backed securities and a $450 million senior secured credit facility, reported the Wall Street Journal.

In a January regulatory filing, Caesars Acquisition appointed a new director, Don R. Kornstein, to join its audit and human resources committees. Kornstein has worked on restructurings in the past, working with Affinity Gaming, gym operator Bally Total Fitness, and Circuit City, which liquidated in 2009, according to the Journal.