Caesars Entertainment Corporation
) recently announced a comprehensive financing plan designed to aid
independent stock listing and significant de-leveraging of its
subsidiary, Caesars Entertainment Operating Co. (CEOC). Following
the announcement, share price of Caesars Entertainment surged 14.0%
on May 7, 2014.
Caesars has undertaken a few steps to achieve its goal, which
include amendment of CEOC's credit facility; raising $1.75 billion
of first lien debt to redeem all of CEOC's existing 2015 maturities
and repay the latter's existing bank debt, sell its 5.0% stake in
CEOC to institutional investors, which would curtail $23.0 billion
of debt; and expand CEOC's board of directors. Also, these include
the sale of CEOC's three Las Vegas properties to Caesars Growth
These actions are part of Caesars constant efforts to improve its
financial condition after the leverage buyout in 2008. In 2008,
Caesars Entertainment was purchased in a leveraged buyout valued at
$30.7 billion and led by
Apollo Global Management LLC
) and TPG Capital.
Since then, the company has undertaken a series of actions to
improve its financial situation and has already lowered debt by
$5.0 billion. As of Mar 31, 2014, Caesars' total long-term debt
stood at $21.0 billion, approximately flat sequentially.
Also, the move comes in the wake of a decline in gambling revenues
in Atlantic City and Tunica, Caesars Entertainment's largest
markets. Yesterday after the market closed, Caesars Entertainment
posted dismal first quarter results with a loss of $1.96 per share,
which was wider than the Zacks Consensus Estimate of a loss of
$1.16 and the year-ago loss of $1.41. Revenue came in at $2.10
billion, down 1.9% year over year and missed the consensus mark of
The downside reflects continued softness in the domestic gaming
market mainly in the Atlantic coast region, increased regional
competition and impact of severe weather.
Caesars Entertainment is working on a number of expansion efforts
and has centralized its operations to increase efficiency and
curtail expenses. The refinancing actions and expansion initiatives
would help the company to restructure its heavy debt and strengthen
its core businesses, going forward.
Caesars Entertainment Corp. presently has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the gaming industry include
MGM Resorts International
Wynn Resorts Ltd.
). Both these stocks carry a Zacks Rank #2 (Buy).
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