Casino on the Brink

Can we afford to bet on Caesars?

June 27, 2013

Caesars gambles on credit

Casino owner has $21 billion in debt and racking up big losses
http://bostonherald.com/business/business_markets/2013/06/ caesars_gambles_on_credit Despite its precarious nancial health, Caesars Entertainment remains condent it will pass state Gaming Commission background checks as part of its partnerships bid to build a $1 billion resort casino at Suffolk Downs. The largest U.S. casino owner has $21 billion-plus in debt and racked up losses of $1.5 billion and $687.6 million in the past two scal years. And when South Korea last week rejected a license for a $500 million casino in which Caesars had a 40 percent stake, Reuters reported Caesars credit rating as a reason.

The largest U.S. casino owner has $21 billion-plus in debt and racked up losses of $1.5 billion and $687.6 million in the past two scal years.

Thats probably going to spook the Massachusetts gaming regulators, said Chad Beynon, a gaming industry analyst at Macquarie Capital. Theyre a highly leveraged company thats barely paying their bills. What they bring to the table is obviously management expertise, decades worth of understanding gaming and the marketing side of it. But they just dont have the balance sheet. The state Gaming Commission is currently investigating the nancial integrity and viability of all casino license applicants. Spokeswoman Elaine Driscoll declined to speculate about the outcome.

Theyre a highly leveraged company thats barely paying their bills.

Representatives of Caesars and its Suffolk Downs partners said theyre condent in their East Boston gaming proposal in which Caesars has a 4.2 percent stake. The Suffolk Downs partnership with Caesars Entertainment is more than capable of nancing the development of a world-class resort, said Chip Tuttle, Suffolk Downs chief operating ofcer.

John Payne, Caesars president of central markets and partnership development, said Caesars has more than $2 billion in cash and, with other partners, has successfully nanced and developed three projects in Ohio and is in the nal stages of nancing a development in Baltimore. But RBC Capital Markets analyst John Kempf believes Caesars burn rate will quickly eat into its cash and force it if not into bankruptcy into a restructuring with lenders late next year or 2015.

Caesars burn rate will quickly eat into its cash and force it if not into bankruptcy into a restructuring

Still, he said, Caesars nancial health shouldnt interfere with Suffolk Downs bid for a gaming license: It would only be a part investor in the whole project, and thats a key difference.

June 21, 2013

South Korea Rejects Casino Bids From Caesars

http://online.wsj.com/article/BT-CO-20130621-706243.html By Kate O'Keeffe and Kyong-Ae Choi

A spokesperson for South Korea's Ministry of Culture, Sports and Tourism Friday told the Wall Street Journal it rejected applications from a consortium including Las Vegas-based Caesars Entertainment Corp. (CZR) and Indonesian conglomerate Lippo Group, and from Japanese magnate Kazuo Okada's Universal Entertainment, because they didn't satisfy qualications.

HONG KONG--South Korea rejected applications for casino licenses from international bidders hoping to invest billions to develop resorts near Seoul, leaving uncertain the country's commitment to cashing in on the booming Asia gambling market.

South Korea rejected applications for casino licenses...the government was concerned about Caesars' nancial stability.

Bidders should get more than 800 out of 1000 points in categories such as investment size and nancial health, the spokesperson said, without elaborating.Bidders should get more than 800 out of 1000 points in categories such as investment size and nancial health, the spokesperson said, without elaborating. A person familiar with the government's thinking said that the government was concerned about Caesars' nancial stability and Universal's lack of experience operating casinos. The government also worried about reputational issues stemming from Mr. Okada's involvement in Japan's pachinko industry, and from a dispute with Las Vegas casino company Wynn Resorts (WYNN), which has spawned lawsuits and federal investigations in several countries.

Steven Tight, Caesars' president of international development, said the decision was "really quite bafing." A statement from the Caesars consortium said it is evaluating its options and that it believed its application had met the government's requirements. Mr. Tight had earlier said that the rst phase of the potential project would cost $500 million and have 100 gambling tables, 150 slot machines, 600 hotel rooms and entertainment, retail and residential space.

Nobuyuki Horiuchu, a spokesman for Universal, declined to comment on the news. In a separate statement late Friday, Universal said that a report commissioned by Wynn alleging Mr. Okada had made improper payments to public ofcials in the Philippines was "lacking credibility." It also said that Universal agreed with the recommendation of an ongoing third-party investigation that it needed to develop a "compliance system" in order to "develop (its) gaming business globally."

The South Korean government remains undecided over its tourism strategy, said the person familiar with the government's thinking. The new casino projects, like most other casinos in South Korea, would have only The news is a blow to permitted foreigners to gamble, necessarily Caesars, which has been limiting the amount of investment companies would deem prudent. Some ofcials believe it struggling under debt... would be wiser to push for regulatory changes to let locals play at the new casinos in exchange for bigger investments from the gambling companies, this person said. Singapore, whose two mega casino-resorts already match the gambling revenue generated by the Las Vegas Strip by allowing locals to gamble with restrictions, is a potential model, the person said.

It is unclear if the companies will appeal the government's decision. They have 90 days.
The news is a blow to Caesars, which has been struggling under debt it accrued from a private-equity buyout in 2007 and from its dependence on the sluggish U.S. gambling market. It has been aggressively looking for opportunities to expand in booming Asia after failing to secure permission to build a casino in the Chinese territory of Macau, where U.S. rivals Las Vegas Sands Corp. (LVS) and Wynn Resorts are ourishing.

South Korea's decision is also unwelcome news for Mr. Okada, who remains embroiled in legal disputes and regulatory investigations, and who has yet to secure a necessary local partner for his $2 billion casino project in the Philippines. Write to Kate O'Keeffe at kathryn.o'keeffe@dowjones.com

http://seekingalpha.com/article/1458031-betting-against-caesars-entertainment

Betting Against Caesars Entertainment

May 23 2013 When it comes to shorting a stock my method is quite simple: I identify a fragile company and make a bet on its eventual collapse. Now, I do not believe in making predictions. I am not trying to predict the exact date when a particular company will go bankrupt or when its Caesars has all the attributes of stock price will crash. I am also not a fragile stock - it is grossly trying to predict which remote event overvalued, has a terrible will cause this crash. Predicting these things is impossible. I only know one balance sheet and deteriorating thing for certain, what is fragile will free cash ow. eventually break; and, luckily, we can easily tell what is fragile.

In this article I will talk about a company called Caesars Entertainment (CZR). Caesars has all the attributes of a fragile stock - it is grossly overvalued, has a terrible balance sheet and deteriorating free cash ow. I believe these things make this stock the perfect short candidate.

Mountain of Debt Creates Signicant Investment Risk

Caesars has one of the worst balance sheets I have ever seen. In fact, it seems as if the only thing this company is good at is taking on more debt. There is simply no margin of safety built in. Even a small setback could cause massive problems for the company and force it to declare bankruptcy. According to the most recent 10-Q balance sheets I have ever (March 31, 2013), the company had just under $2.1 billion in cash, plus an seen. In fact, it seems as if the additional $367 million in restricted only thing this company is cash (comprised of current and nongood at is taking on more debt. current portions). However, the majority of the company's assets consisted of property and equipment of $15.7 billion (57 percent of total assets) and intangible assets of $7.1 billion (26 percent of total assets).

Caesars has one of the worst

It really does not take much analysis to realize that Caesars is a highly leveraged company. For example, it has total debt of $21.3 billion, which makes up more than three fourths of total liabilities. Things get even worse when we take a look at the offIt really does not take much balance sheet obligations. analysis to realize that Caesars is a The company has operating leases which should be highly leveraged company. For capitalized and treated as example, it has total debt of $21.3 debt. As of March 2013, these capitalized operating leases billion, which makes up more than totaled approximately $1.6 three fourths of total liabilities. billion. Additionally, the company has another $1.5 billion in other obligations and commitments that are also kept off-the-balance sheet. These include things such as purchase order obligations, construction commitments, payments to tribes and various other obligations and commitments.

Perhaps things would not be so bad if Caesars was cash ow positive, however, as we are about to see, this is not the case. The company has been posting enormous losses, which has forced it to add more debt to its balance sheet (making it even more fragile). Deteriorating Free Cash Flow Free cash ow has been negative every year and is continuing to deteriorate. Over the last twelve months alone the company burned through more than $775 million in cash. In order for the company to make up for these enormous losses, it will be forced to take on additional debt (increasing risk) and sell additional stock (causing further dilution).

Perhaps things would not be so bad if Caesars was cash ow positive, however, as we are about to see, this is not the case. The company has been posting enormous losses...

Ridiculous Valuation Makes This a Scary Investment

Caesars currently has a market capitalization of about $1.9 billion and an enterprise value of $22.7 billion (including capitalized operating leases). The company is burning through hundreds of million in cash every year, and there are signs that these enormous losses will continue in the future. Since the company could obviously go bankrupt within the next few years, the only way it can be valued is to see what it could be sold for in liquidation.

At the end of March 2013, Caesars had a negative book value of $560 million (including non-controlling interests). However, the company's true book value is far worse than that. For example, the company has $7.1 billion in intangible assets (about The company is burning half of it goodwill), so the tangible book value is negative $7.6 billion. But things through hundreds of million get worse still! As I mentioned earlier, most of the company's assets are made in cash every year, and there up of property and equipment are signs that these approximately $15.7 billion. However, in enormous losses will liquidation these assets certainly would continue in the future. Since not go for this amount. Actually, if they could be sold for 50 percent of this the company could obviously amount it would be a miracle. In reality, Caesars true tangible book value decit go bankrupt within the next exceeds $15 billion. Investors holding few years, shares in this company will end up getting nothing, because the company cannot even pay its bondholders.

Betting Against the House

As should be painfully obvious by now, Caesars is a worthless company that will almost certainly go bankrupt within a few years. In my opinion, even holding the company's bonds is risky. In truth, the only safe investment is put options. I would not directly short this stock because 11 Caesars is a worthless million shares have already been sold company that will almost short (30 percent of oat), which could make it risky if there is good news that certainly go bankrupt within a forces shorts to cover (causing the few years. share price to rise). However, over the long term I believe that investors will be rewarded if they place bets against this stock (preferably using options). It will only take one small setback for the company to cause a massive crash in its stock price and cause those option premiums to go through the roof.

Caesars Entertainment Struggles Under Heavy Debt Load

Rachel Feintzeig

http://bankruptcynews.dowjones.com/Article? an=DJFDBR0020130522e95midh35&cid=32135012&ctype=ts&pid=310&ReturnUrl=http%3a%2f %2fbankruptcynews.dowjones.com%3a80%2fArticle%3fan%3dDJFDBR0020130522e95midh35%26cid %3d32135012%26ctype%3dts%26pid%3d310

May 22, 2013 (c) 2013 Dow Jones & Company, Inc. Gaming giant Caesars Entertainment Corp . is straining under a hefty debt load that needs to be addressed, according to gaming and restructuring experts, who Gaming giant Caesars say an increasingly competitive market and poor strategic decisions Entertainment Corp . is have left the company vulnerable.

The Reno, Nev., company, which operates resorts and casinos under the Harrah's , Caesars and Horseshoe names, has nearly $5 billion in debt coming due in 2015. Its operating performance in the rst quarter of this year was weaker than expected, Standard & Poor's said in a recent downgrade, calling its capital structure "unsustainable in the long term."

straining under a hefty debt load... poor strategic decisions have left the company vulnerable.

"Something has to happen to deal with their upcoming maturities and cash ow issues," Craig Barbarosh , a restructuring attorney with Katten Muchin Rosenman LLP , said in an interview. Mr. Barbarosh isn't involved with the Caesars matter but has worked on a host of gaming cases, recently representing the agent for an exitnancing deal in Atlantic City's Revel AC Inc .'s Chapter 11 proceedings.

Caesars...has nearly $5 billion in debt coming due in 2015.

"They're one of the last major gaming companies that has not gone through a signicant restructuring," Mr. Barbarosh said of Caesars.

While the company has been able to push back some of its debt through recent renancings, it still has an "extremely heavy debt load," according to Gregg Klein, a gaming analyst with Imperial Capital LLC . He described Caesars as "a very highly leveraged company," adding that it's "imperative" for it to renance some of its debt tied to commercial-mortgage-backed securities, which is set to mature in early 2015. "You could see them attempt to come up with a brand-new nancing in the marketplace," Mr. Klein said.

Mr. Barbarosh thinks the company will consider all options, including further renancing or maybe some sort of debt-for-equity transaction. "I think they will do everything they can to avoid a [bankruptcy] ling," he said, adding that Caesars will probably want to negotiate a consensual deal with its lenders. The company has $2 billion in unrestricted cash but also has some "fairly signicant" capital expenditure requirements on the horizon, Mr. Barbarosh said. S&P believes the company "will continue to burn cash" to fund capital expenditures and interest payments. "We believe a restructuring of at least a portion of its debt obligations is S&P earlier this month becoming more likely," the ratings rm said. lowered the company's

S&P earlier this month lowered the company's corporate credit rating to triple-C-plus from B-minus. Caesars said it was "disappointed by S&P's decision."

corporate credit rating to triple-C-plus from B-minus.

We "don't believe it adequately reects the considerable efforts we have undertaken to improve the company's balance sheet and liquidity position, all while investing in future growth prospects," the company said in a statement. "Caesars' liquidity position and debt-maturity prole provide adequate operational exibility and a clear runway for the recovery of the core business and for new growth opportunities to generate returns." A spokesman for Caesars declined to comment further on the challenges facing the company.

Founded in 1937, Caesars operates casinos on four continents and brings in $9 billion in annual revenue. It owns everything from Las Vegas's Planet Hollywood Resort & Casino to the World Series of Poker, a poker tournament that dates back to 1970. The company has 70,000 employees, three million square feet of gaming space and 42,000 hotel rooms. But it's operating in a highly competitive market and has made some missteps in recent years.

The plethora of new casinos that are cropping up across the U.S. as governments hand out more gaming licenses represent one threat to Caesars.

"The market's saturated, but governments aren't looking at it from the standpoint of what the market needs," said Chad Mollman, an equity analyst with Morningstar. "They're looking at it from the standpoint of tax revenues." Native American gaming ventures, in particular, have taken a toll on many of the "old line major gaming players," Mr. Barbarosh said. "Other states are realizing gaming is a way to generate signicant revenue for the state---all of which puts pressure on these high-cost, major-market operators," he said. Mr. Mollman noted that some of the fault lies with Caesars itself, which has passed on some key opportunities, like the chance, during the last decade, to operate casinos in China.

"That turned out to be a huge mistake," he said.

The analyst isn't too optimistic about some of the projects Caesars has recently chosen to funnel money into either, like the Linq. Caesars is pouring $550 million into the openair retail, dining and entertainment venture, which will include the world's tallest Ferris wheel. But Mr. Mollman is forecasting a "low return on investment" for the company. "They haven't really been the best allocators of capital," he said. "We don't have a lot of condence in the company's ability to enter into attractive new market opportunities." Caesars is also missing out on the "massive growth market" in Macau, where it has a golf course but no gaming license, Mr. Klein said, and it hasn't reinvested much in its casinos recently.

"Some of their properties are starting to appear tired," he said.

He estimates the company's leverage as 14 times its earnings before interest, taxes, depreciation and amortization, or Ebitda. S&P puts Caesars's leverage at above 13 times Ebitda.

"Some of their properties are starting to appear tired."

Still, Mr. Klein remains relatively upbeat about the company's prospects, saying it has options and some time to sort through its problems. "They're constantly raising nancing," he said. "They never sleep when it comes to their capital structure."

Write to Rachel Feintzeig at rachel.feintzeig@dowjones.com.

http://pokerati.com/2012/09/is-caesars-bound-for-bankruptcy/

Is Caesars Bound for Bankruptcy?

Financial analyst says WSOP spinoff could be in the cards Howard Stutz / Las Vegas Review-Journal, Sep 7, 2012 Fitch Ratings Service said Wednesday it downgraded its view on Caesars Entertainment Corp. from stable to negative, hinting that the casino operator could look at Chapter 11 bankruptcy protection as a method to restructure its sizable debt. Another option could include spinning off the Caesars Interactive Division as a separate public company. Caesars Interactive oversees the World Series of Poker. The outlook revision reects Fitchs heightened concern regarding (Caesars) near-to-medium term cash Fitch Ratings Service... burn rate and potential covenant downgraded its view on Caesars compliance pressure, Fitch analyst Entertainment Corp. from stable Michael Paladino wrote in a report to to negative, hinting that the investors. These factors, combined with previously expressed concerns casino operator could look at about weakening relative asset Chapter 11 bankruptcy quality due to constrained capital reinvestment, more than offset the protection... positive credit impact from recent transactions executed to push out its debt maturities meaningfully.

Paladino said there was an increasing possibility that Caesars, which operates 10 Strip casinos and more than 50 casinos nationally, could look to execute transactions that Fitch views as a default. The report from the bond rating service surfaced early Wednesday and may have been responsible for another decline in Caesars shares. The company closed at a 52-week low of $6.48 on the Nasdaq Global Select, down 20 cents, or 2.99 percent. Caesars went public Feb. 4 at $9 a share. The stock shot up 71 percent that day, to $15.39.

Caesars has almost $20 billion in long-term debt, the highest in the casino industry. Fitch told investors the casino operator may need to obtain a covenant amendment or waiver by late 2013 or early 2014.

Besides entering into Chapter 11, Caesars may elect to execute debt exchanges, possibly for equity since the company is now public, Paladino said.

Caesars has almost $20 billion in long-term debt, the highest in the casino industry.

However, Paladino said debt exchanges are less likely now than in 2009 when the company reduced debt by $3.8 billion by exchanging a bulk of its unsecured notes with subsidiary guarantees into second-lien notes with lower amounts. Caesars spokesman Gary Thompson declined comment on the Fitch report, saying the company doesnt talk about forward looking reports. Thompson noted that Fitch afrmed Caesars existing ratings for the companys various units, even though the overall outlook was changed to negative. Caesars Entertainment, which owns Caesars Palace, Ballys Las Vegas, Planet Hollywood and the Rio, is expanding both on the Strip and nationally. In the second quarter, Caesars lost $241.7 million. The company is spending $500 million to build Project Linq, a nongaming retail, dining and entertainment development between the Flamingo and Imperial Palace properties. Outside of Las Vegas, the company opened a $350 million casino in Cleveland, is building a $400 million casino in Cincinnati, is planning a $300 million casino in Baltimore and is bidding to build a $1 billion casino in Boston.

Caesars has an equity partner for projects outside of Nevada. Fitch has reduced its forecast for Caesars cash ow, pretax earnings, beyond 2015.

The companys higher cost renancing activities have also contributed to the weakened near-term (cash ow) prole, Paladino said. The ratings service said Caesars is receiving income from its ownership in Caesars Interactive, which operates the World Series of Poker, online gaming operations in the United Kingdom and social gaming website Playtika. Fitch believes that most of Caesars current equity value is attributable to this unit, which would benet materially if online gaming is legalized on the federal level in the U.S., Paladino said.

A spinoff of Caesars Interactive or other effort to monetize the online business could be logical precursors to a restructuring, Paladino said.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter. ________________________________________________________________ Copyright 2012 Stephens Media Interactive GamingWire. All rights reserved.

 STEVEN STRADBROOKE

SOUTH KOREA REJECTS CASINO LICENSE BIDS BY CAESARS

JUNE 21, 2013

American casino operator Caesars Entertainments futile pursuit of an Asian presence was dealt yet another setback on Friday after South Korea rejected its application to construct and operate a resort-casino near the capital Seoul. Earlier this But sources told both month, UBS Investment Research analyst Sera Oh reported that Caesars Reuters and the Wall Street bid for the potentially lucrative casino Journal that the government license was almost conrmed, but the key word there appears to have been was concerned by Caesars almost. Caesars had teamed with crushing debt load, which Indonesian conglomerate Lippo Group and an unidentied local third party on a created doubts in the joint venture dubbed LOCZ Korea, bureaucrats minds as to which sought to build a casino on the Caesars ability to see the Yeongjongdo island district of Incheons free economic zone. Incheon project through to

completion. South Koreas Ministry of Culture, Sports and Tourism declined to offer specic reasons for rejecting the LOCZ Korea bid, saying only that it had failed to satisfy the governments criteria. But sources told both Reuters and the Wall Street Journal that the government was concerned by Caesars crushing debt load, which created doubts in the bureaucrats minds as to Caesars ability to see the Incheon project through to completion.

Steven Tight, Caesars president of international development, called the decision really quite bafing, leaving one to surmise that Steven doesnt spend a lot of time reading the nancial papers. Even before Fridays news, Caesars stock has slumped this week, from a high of $13.93 on Tuesday to $12.25 as of time of writing. (Could be coincidence, but the decline neatly coincides with Sheldon Adelsons verbal broadside against all things online gambling, on which Caesars had been pinning hopes for a

turnaround).) LOCZ Korea released a statement saying it was surprised and disappointed by South Koreas decision because it believed it had met all of the governments requirements. The joint venture has a 90-day window in which to decide whether to appeal the decision and is said to be evaluating its options.

Also getting a taste of the back of South Koreas hand was Japans Universal Entertainment, which had teamed with South Korean retail shopping outt Shinsegae Group on their own Incheon casino bid. In this case, South Korea was reportedly bothered by the Japanese pachinko giants inexperience in running full-scale casinos as well as reputational issues stemming from the ongoing brouhaha between Universal boss Kazuo Okada and Wynn Resorts, which has also complicated Universals Philippines casino aspirations.

Analysis: Stock struggles, debt have analysts concerned about Caesars

http://www.reviewjournal.com/business/analysis-stock-struggles-debt-have-analysts-concerned-aboutcaesars

By Howard Stutz LAS VEGAS REVIEW-JOURNAL Let's put to rest one rumor concerning Caesars Entertainment Corp. that has been oating throughout the poker blogosphere.

The company is not selling the World Series of Poker.

Caesars is saddled with nearly $20 billion in debt, highest in the gaming industry.

The company's stock price has taken a bath, falling more than 60 percent since the initial public offering in February.

Caesars is saddled with nearly $20 billion in debt, highest in the gaming industry.

One respected bond analyst has said the casino operator might need the help of the U.S. Bankruptcy Court to restructure its obligations.

But the World Series of Poker is not on the auction block. The rest of the company? That's where the concern lies.

In fact, if the U.S. ever gets around to legalizing Internet poker, the brand might become the most lucrative product in the Caesars portfolio.

Caesars Entertainment is the largest casino operator in the world, with 55 casinos in 13 states and six countries. In Nevada, Caesars has 15 properties, including 10 on or near

the Strip, such as Caesars Palace, Rio, Harrah's, Bally's and Planet Hollywood Resort. Caesars is also building the $550 million Project Linq between the company's Flamingo and Imperial Palace hotel-casinos. But, after two straight quarterly losses totaling more than $522 million in the Caesars isn't making enough rst half of 2012, the investment money to cover the payments community is understandably jittery.

Over the past 24 months, the company has worked to extend due dates of its corporate bonds by several years. The earliest will mature in 2015. The extensions, however, come with higher interest costs.

and there is a growing concern the casino operator is on shaky ground.

Caesars isn't making enough money to cover the payments and there is a growing concern the casino operator is on shaky ground.

OUTLOOK DOWNGRADED

Fitch Ratings Service on Sept. 5 lowered its outlook on Caesars Entertainment from a "stable" rating to "negative." Analysts wrote the company "is burning through cash" at a rate where it may bump up against debt covenants. The maximum multiple Caesars' debt can reach in comparison to cash ow is 4.75 times. In recent earnings, the gure has been as high as 4.4 times cash ow.

And it's growing.

Fitch is worried that Caesars' revenues - more than $4.4 billion in the rst six months of the year - won't cover costs, especially if debt interest has increased. "Fitch lowered its base case projections following weak second-quarter results and the continuing third-quarter trend of disappointing revenues being reported by states in which Caesars operates," Fitch gaming analyst Michael Paladino wrote. "Fitch maintains a circumspect view regarding the prospects for a stronger-thanexpected improvement in Caesars operating results over the next couple of years," Paladino said. A Chapter 11 bankruptcy reorganization, which would allow Caesars to restructure the debt, was one option Fitch put on the table.

Those close to the company, however, said Caesars Entertainment Chairman Gary Loveman would nd other measures before placing the company in bankruptcy. That would be the last possible move.

IMAGINING A SPINOFF

One course could involve spinning off subsidiary Caesars Interactive Entertainment into its own separate, publicly traded company. Caesars Interactive operates the lucrative World Series of Poker. The brand, now in its 43rd year, has grown into a year-round poker extravaganza. Beyond the annual Las Vegas showcase at the Rio, the World Series of Poker has 20 Circuit events throughout the U.S. and Canada, the World Series of Poker Europe, and the World Series of Poker Asia-Pacic starting next April. Also, Caesars Interactive controls the company's legal online gaming operations in Europe and the social gaming website Playtika. In the second quarter, Caesars said revenues from the interactive division helped offset losses incurred from the Strip and the company's four Atlantic City resorts. Sources conrmed Caesars ofcials were proceeding with the interactive division's IPO earlier this year. However, company executives were spooked after shares of social gaming giant Zynga fell more than 83 percent since they began trading Dec. 16.

How valuable is Caesars Interactive?

Rock Gaming, Caesars' partner in two Ohio casinos and planned casino in Baltimore, bought 12,300 shares - an undisclosed percentage - of the business in April for $60.8 million.

Rock Gaming has an option to buy another 3,140 shares for $19.2 million next month.
Fitch said a spinoff of Caesars Interactive would immediately signal a potential restructuring.

Caesars ofcials declined to comment on the Fitch report. STILL GROWING

Contradicting the rating service's view is the company's efforts to expand and grow its presence in emerging gaming jurisdictions. But to save on draining resources, the company is taking on partners and giving up equity. In May, Caesars and Rock Gaming opened the $350 million Horseshoe Cleveland. The companies also own the $400 million Horseshoe Cincinnati, which opens next spring.

The proposed $300 million Harrah's Baltimore could open in 2014. Caesars and the Suffolk Downs Racetrack are the leading bidders for a proposed $1 billion hotel-casino complex in Boston. In the meantime, Caesars is shedding older holdings. In an interview at the Horseshoe Cleveland opening, Loveman said Caesars would explore the sale of casinos "in crowded markets" to nance new properties. A week earlier, the company agreed to sell Harrah's St. Louis for $610 million to regional casino rival Penn National Gaming. Analysts expect the proceeds will help pay down debt, but the transaction won't buy Caesars much time. To use a current economic comparison, the deal is like an underwater homeowner who owes the bank more than twice what his house is now worth. Selling a piece of furniture won't help pay off the monthly mortgage. Caesars could still be a seller. There may be interest in the company's two casinos in Iowa and its four properties in Mississippi. It is also hoping to unload its ill-fated Caesars Macau, a 175-acre golf course on Macau's Cotai Strip region the company bought for $577.7 million in September 2007 with plans to build a hotel-casino destination.

PINNING HOPES ON LINQ

One venture considered safe is Project Linq on the Strip. The retail, dining and entertainment district anchored by a 550-foot-tall observation wheel is under construction, fully funded and scheduled to open next year. Caesars, which was known as Harrah's Entertainment until the end of 2010, is the end result of several high-prole, multibillion-dollar gaming industry mergers in the past decade. However, the company's $29 billion buyout in January 2008 by private equity rms Apollo Management Group and TPG made some wonder whether the deal had left the casino operator with too much debt. Loveman said in May that the company's size and 45 million-member Total Rewards customer loyalty program would help it weather the economic storms. "We have a dominant American operation," Loveman said, "We are so much bigger than anyone in the United States." Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.

http://calvinayre.com/2012/09/05/casino/caesars-downgraded-possible-chapter-11-orinteractive-unit-spinoff-ahead/

CAESARS DOWNGRADED, POSSIBLE CHAPTER 11 OR INTERACTIVE UNIT SPINOFF AHEAD

SEPTEMBER 5, 2012

Embattled US casino operator Caesars Entertainment Corp. took another shot to its chin on Wednesday, as ratings agency Fitch downgraded its outlook on the stock from stable to negative. The move which follows similar downgrades from other Caesars current revenue rating services in July and August was prompted by concerns over streams simply arent Caesars ability to honor its crippling sufcient to meet the $20b+ debt obligations, which are the highest among all casino outts. With companys annual $1b+ no Macau prots to offset a stagnant interest payments, let alone US casino market, Caesars current revenue streams simply arent sufcient adequately fund Caesars to meet the companys annual $1b+ existing operations. interest payments, let alone adequately fund Caesars existing operations. Caesars stock closed out the day at $6.48, down almost 3% on the day and off nearly 58% from the high it briey hit following its February IPO.

Fitch Ratings Service analyst Michael Paladino suggested Caesars might seek to buy time by executing debt exchanges for equity, although by this point, nding willing and able investors/suckers may prove tougher than nding a Bigfoot that isnt just a hillbilly in an ape suit. Paladino also suggested other, less appealing options may be required to right the ship and avoid potential covenant compliance pressure. Such remedies include ling for Chapter 11 bankruptcy protection or spinning off the companys

Caesars Interactive division, which controls the World Series of Poker brand, offers social gaming on Facebook via its Playtika offshoot and conducts online gambling operations in the UK in conjunction with 888 Holdings.

Paladino believes that most of Caesars current equity value is attributable to the Interactive unit, and thus a spin-off or other means of monetizing the online business could be logical precursors to a restructuring. The parent guarantees [Caesars Entertainment subsidiary Caesars Entertainment Operating Co.] debt and sponsors, if electing to restucture OpCo, would likely want to extract value out of Interactive and not risk the entity being pulled into the restructuring proceedings.

Fitch notes that Caesars Interactive would benet materially if online gaming is legalized on the federal level in the US. But that scenario appears unlikely, given the Republican National Committee put its opposition to online gambling in print last week. Federal poker backer Sen. Harry Reid (D-NV) reportedly needs 10-20 GOP Senate votes to guarantee passage of an online poker bill in the 2012 lame duck session of Congress, and an unnamed Democratic aide recently told the Las Vegas ReviewJournal that Reid can currently count on just two GOP allies the online poker bills coauthor Jon Kyl (R-AZ) and Reids Nevada counterpart Dean Heller. So Reid is unlikely to be able to ride to Caesars rescue, even if Caesars CEO Gary Loveman manages to squeeze himself into Bonnie Tylers dress and belt out a cringe-worthy 1980s tune in one of Caesars karaoke lounges

http://www.fool.com/investing/general/2012/11/06/how-long-can-caesars-entertainment-survive.aspx

How Long Can Caesars Entertainment Survive?

By Travis Hoium November 6, 2012 Ever since Caesars Entertainment (Nasdaq: CZR ) hit the public market, the questions I've asked about the company have had more to do with survival than anything else. The company consistently reports huge losses, its markets aren't improving at all, and it has a debt load that points to bankruptcy unless something dramatically changes Zero growth wouldn't be a with its balance sheet.

The company's recently released earnings report does little to ease any of those fears. Let the losses begin The third quarter showed little in the way of improvement for Caesars. Revenue rose a paltry 0.4% to $2.2 billion, adjusted EBITDA rose the same amount to $484.5 million, and net loss tripled to $505 million, or $4.03 per share.

problem if Caesars wasn't spending every penny it got on servicing debt, but with over $20 billion in debt that's exactly what the company is doing.

The number of trips from vacationers decreased in every one of Caesars' markets in the third quarter, and if it weren't for a 7.8% bump in spending in Las Vegas, spend per trip would have been down in each locale as well. Zero growth wouldn't be a problem if Caesars wasn't spending every penny it got on servicing debt, but with over $20 billion in debt that's exactly what the company is doing. Take a look at EBITDA minus interest expense below. This shows that Caesars is barely able to pay for its debt, and this doesn't even include ongoing capital improvements and some other operating expenses, which brings overall cash ow lower.

Unless operations improve, there's no end in sight to the death spiral for Caesars.

Little upside for Caesars The biggest problem for Caesars is that it has little upside in most of its Unless operations improve, markets. Las Vegas is mature and won't likely grow double digits unless there's no end in sight to the the economy makes a surprising death spiral for Caesars. turnaround. In regional markets, the company is contending with a growing number of casinos across the country as states approve gaming to expand tax revenues.

Compare this to Macau, where Las Vegas Sands (NYSE: LVS ) , Wynn Resorts (Nasdaq: WYNN ) , and MGM Resorts (NYSE: MGM ) have limited competition and growing demand from gamblers. All three of these companies own Las Vegas casinos but they also have resorts in Macau, where gaming is far more protable. Even in the U.S. there are better gaming stocks. Penn National (Nasdaq: PENN ) is in the same slow-growth gaming markets as Caesars, but the company is solidly protable because management didn't pile on debt during the boom years. Caesars can't even see protability on the horizon. Caesars has a little time So, how long can Caesars survive? The company doesn't have any major debt maturities before 2015, so there's no reason to think the company will go under before that, unless conditions really deteriorate. But that's when the rubber So, how long can Caesars really meets the road. Caesars is still beneting from low interest rates and survive? the notes due in 2015 are at rates mostly below 4%. If the company has to renance at higher rates because general rates go up or the company continues to struggle -- or both -- the company could be in real trouble.

Caesars will be ne for at least three years, but if we continue to grow U.S. GDP at 1% to 2%, I doubt the company can survive after that. The legalization of online gaming may also help, but that's a dream for shareholders right now. I'm afraid this stock is still hands-off in this Fool's opinion. If you're looking for a gaming jackpot, I would steer clear of Caesars and focus your attention on Asia. That's where Las Vegas Sands made a big bet on Macau gaming about a decade ago that's paid off in spades. The company is now looking to spread empire further, but will it be able to replicate its prior successes?

http://www.legalpokersites.com/blog/caesars-entertainment-pokerstars-wsop/3555/

Did Caesars Entertainment and PokerStars Have Serious Discussions of WSOP Sale?
By JOHN MEHAFFEY March 7 2013 The American Gaming Association (AGA) led a brief this week to protest the potential licensing of the Rational Group, parent company of PokerStars, in the State of New Jersey. PokerStars responded with an allegation that Caesars Entertainment, who appears to be the main company behind the complaint, offered to sell ...the company is now $24 them the Rio and the World Series of billion in debt. Poker brand.

Caesars Entertainment has yet to respond to these allegations. There could be a number of reasons for this. They may feel that there is no reason to respond to this allegation publicly. They may also want the AGA to ght their battle for them. Whatever the reason, this is quite an interesting accusation for PokerStars to oat publicly.

Rio Has Reportedly Been on the Market for Years

Rio has seen better days. The resort was built in 1990 as a locals casino with oversized rooms that could be described as luxury in their day. The property no longer meets the standards of what most people would consider to be a luxury hotel.

It is no secret that Caesars Entertainment would like to sell Rio for the right price. It is the only property in Las Vegas that the company owns that is not on the Las Vegas Strip.

The companys gross revenue barely covers the interest payments on their debt.

Caesars Entertainments Massive Debt Load

Harrahs Entertainment, now known as Caesars Entertainment, bought the property in 1999. A lot has changed within the company since then. Most notably, the company is now $24 billion in debt. Some of this debt was acquired when Harrahs Entertainment

went private in 2008, while some of this debt was created to nance the privatization of the company that again went public in 2012. The companys gross revenue barely covers the interest payments on their debt.

Rios Current Capacity Within Caesars

Rio serves one main purpose now. The 160,000 square-foot convention center allows for affordable conferences on the property. The hotels competitive rates also help draw potential conventioneers. This is the same convention center that hosts the annual World Series of Poker. While there is no public information about this, the World Series of Poker is likely to be the most protable convention of the year at Rio. At the very least, the series lls Rios convention center during a time that is typically slow for Las Vegas. Not only this, but it sells hotel rooms at Rio and many other Caesars Entertainment properties. The World Series of Poker also helps Caesars Entertainment generate mailing lists. Any player that enters an event must provide a Total Rewards card with their buy-in that includes their personal information. This is no accident. Caesars is using this information for the day that they can offer online gambling to players on that list. In the meantime, they can at least market their Las Vegas and regional casinos to those players.

WSOP not Wholly Owned by Caesars Entertainment Back to the Reported WSOP Offer

The World Series of Poker brand is synonymous with Caesars Entertainment, but it is actually owned by Caesars Interactive. Caesars Entertainment does not own the interactive division in its entirety. Rock Gaming, their partner in Ohio and Maryland, owns a portion of Caesars Interactive.

This brings us back to the reported offer to sell of the World Series of Poker brand to PokerStars. The World Series of Poker is not a wholly-owned subsidiary of Caesars Entertainment. They could sell this without the consent of their partner Rock Gaming, but would they do this without a serious consultation with their partner in two developing states? Caesars Entertainment selling their share of Caesars Interactive would have two different scenarios. One would be selling just the portion that they own. Rock Gaming purchased an undisclosed percentage of the company in 2012 for $60.8 million with an option to purchase more shares for $19.2 million. This option does not appear to have been exercised at this time. Since Caesars Interactive is a private company, there is no way to know what portion of the company the original purchase covered or what the current value is for the options not yet exercised.

 Several scenarios could occur under a sale. It depends on what the contract states.

Caesars Entertainment could have a controlling stake in the company. If that is the case, they could force Rock Gaming to sell their shares in a takeover. Rock Gaming could also hold their shares after a takeover and still maintain their Caesars Interactive and World Series of Poker stake. They could also sell their current shares and hold their options. Rock Gaming might consider the Rational Group and PokerStars to be a company that they do not wish to associate with and decide to dispose of their entire investment.

This presents another point. The Rational Group and their subsidiary PokerStars might nd it difcult to receive a Nevada gaming license. Even if Caesars Entertainment pushed for this there may be other casino companies in Nevada that would object to the licensing of a company that once operated in the State without a license. Todays news that 888 was recommended for an interactive license might say otherwise, but a battle with other companies is certainly not out of the Many industry analysts have question. 888 can at least claim that they were never under indictment in the discussed a potential sale of US. There seems to be a separation of the interactive unit to keep companies that left the US market postUIGEA and ones that continued to the company out of accept US players. The legality of this bankruptcy. is debatable, but the perception is certainly there.

Caesars Entertainments Future Could Depend on Interactive Division

Many industry analysts have discussed a potential sale of the interactive unit to keep the company out of bankruptcy. While Caesars Entertainments nancial issues are well-known, even a $2 billion sale would not pay off 10% of the companys debt. Some analysts feel that the potential for online gambling in the US under the World Series of Poker brand is the only way the company can survive without a liquidation of assets. The company has $3.6 billion in bonds that come due in 2015. The company has been successful in kicking the can down the road in the past few years by renancing debt, but another recession or catastrophic issue with a property could restrict the companys ability to renance debt.

Some have speculated that the companys stock price could collapse if the interactive division is sold or brought public as a separate entity. These analysts assume that this would be a precursor to a bankruptcy ling. Fitch describes a potential spinoff of their the interactive unit as a logical precursors to a restructuring. A restructuring is often done through a bankruptcy ling if creditors are unable to agree on new terms.

Is Caesars Entertainment willing to expose themselves to this scrutiny by investors if it is perceived that the only way out of their hole is through online gambling?

Rumors surrounding the sale of Rio have been oating around Las Vegas for years. The company has been unable to unload the property. It would make sense that Caesars may want to pair the World Series of Poker brand with this sale considering there are few other company properties that could host the annual event. I believe that such a sale was discussed with Rational Group. The only question in my mind is how serious the offer was. Did Caesars ask for an unrealistic number, or was there an actual negotiation that broke down?

Caesars Entertainment has been silent for 48 hours after this allegation surfaced. There could be any number of reasons for their silence. Until we know for sure, all we can do is wonder what went on behind the scenes.

April 23, 2013

Caesars Entertainment to Create New Venture

By Ben Fox Rubin Bloomberg News Caesars Entertainment Corp. said Apollo Management L.P . and TPG Capital L.P. plan to invest $250 million each in a new venture called Caesars Growth Partners LLC, part of a transaction intended to provide capital for Caesars growth plans and Caesars has struggled to improve its balance sheet.

Caesars Growth would owned by Caesars and participating Caesars stockholders.

recover fully from the recession, and hasnt posted a prot since late 2009.

Shares jumped 13% premarket to $14.14. As of Mondays close, the stock was up 80% so far this year. The transaction is an important step in our ongoing efforts to improve the companys balance sheet and position ourselves to make strategic investments, Caesars Chief Executive Gary W. Loveman said. He said Caesars Growth Partners was a simple and exible capital structure that would provide the company with a way to pursue growth opportunities while also retaining a signicant portion of the nancial upside associated with these assets and projects. Growth Partners intends to use proceeds raised to purchase from a Caesars subsidiary the Planet Hollywood Resort & Casino in Las Vegas, Caesars joint venture interests in a casino under development in Baltimore and a nancial stake in the management fee stream for both of those properties. Caesars and its afliated companies will continue to manage Planet Hollywood and the Baltimore property. Caesars has struggled to recover fully from the recession, and hasnt posted a prot since late 2009. As its competitors have thrived in Macau, Caesars had been unable to acquire a gambling license there, and has been trying to unload its Macau properties. Instead, the debt-burdened company is dependent on U.S. markets like Las Vegas,

which has seen a faltering comeback, and Atlantic City, N.J., which is poised to benet from the impending statewide legalization of online gambling.

Caesars Entertainment Stock Continues to Fall

as Analysts Suggest Debt May Need to be Restructured and Assets Like the World Series of Poker be Spun Off

By Steve Green, Las Vegas SunMcClatchy-Tribune Regional News

http://www.hotel-online.com/News/PR2012_3rd/Sep12_CaesarsStock.html

Sept. 05, 2012--The stock of casino resort giant Caesars Entertainment Corp. of Las Vegas continues to fall this week as more analysts suggest it may have to restructure its debt and spin off assets like the World Series of Poker.

Caesars stock fell 10.7 percent last week, slid another 7 percent on Tuesday and opened down another 2 percent today at $6.55.

In the latest report to raise doubt about Caesars' ability to meet its nancial obligations...

Caesars lost $241.7 million in the second quarter amid anemic spending by guests and intense competition in its big Las Vegas and Atlantic City markets. In the latest report to raise doubt about Caesars' ability to meet its nancial obligations absent some sort of restructuring of its $19.9 billion in debt, Fitch Ratings today revised its ratings outlook on Caesars from stable to negative. Analysts are concerned that even as Caesars expands with projects like the Linq entertainment district in Las Vegas, it continues to lose money amid tough competition and it's paying out so much cash in interest that it doesn't have enough cash left over to properly maintain its existing hotels and casinos.

It's paying out so much cash in interest that it doesn't have enough cash left over to properly maintain its existing hotels and casinos.

Fitch today estimated that a Caesars' subsidiary, Caesars Entertainment Operating Co., will burn through $450 million to $600 million in both 2013 and 2014. That represents cash ow losses and capital spending that will have to be covered by the parent company or the operating company (OpCo) taking on new debt.

Analysts say Caesars has adequate liquidity in the near term to meet its obligations, and it has sponsors with access to cash to cover continued losses and maintenance spending.

But the analysts are also more frequently asking if Caesars' biggest investors will be willing to continue pumping cash into a money-losing operation. Fitch analysts today said that instead of sinking more cash into the operating company, Caesars' deep-pocketed sponsors Apollo Global Management LLC and TPG Capital LP may instead opt to restructure the operating company's debt.

But the analysts are also more frequently asking if Caesars' biggest investors will be willing to continue pumping cash into a moneylosing operation.

"A spin-off of Caesars' Interactive unit or other means of monetizing the online business could be logical precursors to a restructuring. The parent guarantees OpCo's debt and sponsors, if electing to restructure OpCo, would likely want to extract value out of Interactive and not risk the entity being pulled into the restructuring proceedings," Fitch said in its report. Caesars' interactive unit includes the World Series of Poker brand, social gaming company Playtika and Caesars' online gaming operations in the United Kingdom. "Fitch believes that most of Caesars' current equity value is attributable to this unit, which would benet materially if online gaming is legalized on the federal level in the U.S.," Fitch said in its report. "Besides (possibly) entering into Chapter 11 (bankruptcy), Caesars may elect to execute debt exchanges, possibly for equity since the company is now public," Fitch added. Caesars spokesman Gary Thompson said the company had no comment on the possible scenarios in the Fitch report but pointed out that Fitch afrmed Caesars' existing ratings, even as it changed the rating outlook to negative.

___ (c)2012 the Las Vegas Sun (Las Vegas, Nev.)


Suffolk Downs investor Vornado pulls out

By Mark Arsenault | GLOBE STAFF

MARCH 29, 2013

http://www.bostonglobe.com/metro/2013/03/28/vornado-pulls-out-suffolk-downs-casinobid/PZgJNq9AaJ5uZKRirZa1WP/story.html One of Suffolk Downss largest stakeholders, Vornado Realty Trust, is divesting its 19.9 percent share in the track because its executives are unwilling to submit to the invasive background checks required of all casino license applicants. The state gambling commission will allow Suffolk Downs to continue its pursuit of casino development rights while Vornado attempts to sell its share of the venture. Suffolk Downs insisted that Vornados exit from the project will have no impact on the tracks pursuit of the sole Greater Boston casino license.

On the day the track lost a prominent investor, Suffolk Downs most powerful political backer, Mayor Thomas M. Menino, announced he would not run for reelection, a possible second blow to the longtime frontrunner for casino development rights in Greater Boston.

One of Suffolk Downss largest stakeholders, Vornado Realty Trust, is divesting its 19.9 percent share in the track because its executives are unwilling to submit to the invasive background checks required of all casino license applicants.

The point of intrusive background checks is to ensure that casino licenses go to nancially stable applicants of good character, and lingering questions about who will own the business can undermine a bid, said Roger Gros, a gambling industry specialist and the publisher of Global Gaming Business. Theres going to be a lot of questions about the ownership status, and if theyre not cleared up by the time the bidding is nalized, this could be a serious problem for them, Gros said. The gambling commission approved a transfer of Vornados shares Thursday to a blind trust over which the company will have no control. That is an interim step that will allow the tracks casino application to move forward while Vornado works to sells its interest as soon as possible, said Catherine Blue, the gambling commissions general counsel.

Suffolk Downs and partner Caesars Entertainment propose a $1 billion casino development at the East Boston racetrack. They are competing for a license with Las Vegas developer Steve Wynn, who wants to build on the Mystic River waterfront in Everett, and Foxwoods Resort Casino, which has joined a gambling resort proposal in Milford.

The commission is expected to award the license by early 2014.

Executives and key personnel associated with all casino applicants in Massachusetts must disclose personal, nancial, and tax information to commission investigators as part of the background check. The checks are intentionally intrusive, to weed out applicants with shaky balance sheets or with people of questionable character in key positions. The gambling commission identied 14 key people at Vornado who needed to submit to the background check. One was allowed to withdraw and two led the necessary disclosure forms. But 11 Vornado representatives refused to le required disclosure forms, according to a memo from Blue, the commissions general counsel. Refusing to comply would have jeopardized the Suffolk Downs casino application. The stalemate led to intensive behind-the-scenes negotiations with the commission to develop a compromise that allows Suffolk Downs to stay in the hunt for a license. The commission agreed to allow Vornado to transfer its shares to a trustee, who will submit to the background check. The trustee will be Stephen Kidder, managing partner of law rm Hemenway & Barnes.

The commissions ongoing background checks should remain on schedule, Blue said.
The partnership includes horse and racing enthusiast Richard Fields, a casino developer and former Donald Trump associate; Joseph ODonnell, founder of Boston Culinary Group; Caesars Entertainment, the gambling company that will operate the resort if the track wins a casino license; and several other partners with small shares, according to a list supplied by the gambling commission, which also oversees racing.

Suffolk Downs declined to comment on whether any of the other partners in the venture would buy Vornados shares.

Vornado acquired a stake in Suffolk Downs in 2005, according to the track ofcials. The City of Boston has in the past threatened to leverage the tracks pursuit of a casino license to force Vornado to complete a stalled development project in Downtown Crossing.

A new developer, Millennium Partners, took over the Downtown Crossing project in 2012. Spokesmen for Vornado and Millennium could not be reached Thursday.

Suffolk Downs downplayed the exit of Vornado, noting that the gambling commission expects to keep its background checks on schedule. We are condent in our ability to design, nance, develop, and operate a world-class Caesars Resort at Suffolk Downs that will be an economic engine for the creation of jobs and tourism in our Commonwealth, Suffolk Downs chief operating ofcer Chip Tuttle said in a statement. Clyde Barrow, a casino specialist at the University of Massachusetts Dartmouth, said Vornado is much more comfortable with real estate development than a casino. I think [Vornado] originally got into this with the idea that the racetrack would eventually close, and they would be able to develop that property, said Barrow. Im sure theyve never been involved in the kind of background checks being required by the Gaming Commission. Have you seen those forms? They want to know everything about you, your family, your friends, kids, your associates, business partners. I suspect there are a lot of people associated with the company who are just saying, Lets get our money and get out of here.

John Ribeiro, a vocal opponent of a Suffolk Downs casino, questioned how the track could still be in the running for a license if its license application is incomplete more than two months after the January application deadline. Elaine Driscoll, spokeswoman for the commission, said discussions continue with various applicants over who must le disclosure forms, as developers add local partners and ne-tune their proposals.