The .4 billion sale by Caesars Entertainment Corp. of its lucrative Playtika social gaming platform is already paying dividends for the beleaguered parent of debt-laden casino giant Caesars Entertainment Operating Company.
CEC shares rose the most in five months last week—18 percent in trading in New York—despite posting a $2 billion second quarter loss incurred mainly as a result of the protracted Chapter 11 restructuring of CEOC, which has been operating under U.S. Bankruptcy Court protection since January of last year.
Also, the company’s $3.6 billion of 10 percent second-lien notes surged 8.5 cents to 51.5 cents on the dollar.
The reason for the increases was a sudden shaft of light in CEOC’s seemingly endless bankruptcy tunnel. It came in the form of CEC upping its offer to recalcitrant holders of CEOC’s subordinate debt, agreeing to pay these junior creditors as much as 55 cents on the dollar in notes and stock, provided two-thirds of them agree. As of last week, slightly more than one-third had.
The sale of Playtika appears to have been the key.
Chinese investors led by Shanghai Giant Network Technology are paying cash for the Israeli company, which will remain independently managed, as it was under Caesars, news reports said.
The consortium includes Alibaba Group founder Jack Ma and his private equity firm Yunfeng Capital, China Oceanwide Holdings Group, China Minsheng Trust, CDH China HF Holdings and Hony Capital Fund.
Playtika, which Caesars acquired in 2011 for $170 million, offers a selection of free games—Bingo Blitz and Slotomania are among the best-known—that contain in-app purchasing opportunities. Users play with virtual currency but they do spend real money by purchasing items in the games.
Playtika had $725 million in revenue last year and is on pace in 2016 to grow that to $900 million.
For the three months ended June 30, CEC reported a 7.8 percent increase in revenue to $1.2 billion, which the company credited to another stellar performance by its Caesars Interactive Entertainment division, which includes Playtika.
The company’s six bricks-and-mortar casinos didn’t fare as well. Net income was down more than half to $8 million on revenue that was flat year on year at $562 million.
Revenue at the six affiliated casinos known as Caesars Growth Partners casinos was up 8.5 percent to $423 million while profit rose more than half to $67 million thanks to the reopening of the renovated LINQ property in Las Vegas.
CEC doesn’t count CEOC’s performance in its numbers but does break them out separately. CEOC revenue was down 3 percent to $1.17 billion. Adjusted earnings were up 2 percent to $309 million. The numbers were boosted by strong gaming volume at Caesars Palace on the Las Vegas Strip.
