Casino company Caesars Entertainment Corp (CEC) on Monday said it is to buy back a unit that it had previously spun off in a 2013 listing that at the time raised US$1.17 billion.The deal will be an all-stock transaction.
CEC plans to merge with its affiliate Caesars Acquisition Co. It is part of a wider exercise linked to the planned voluntary bankruptcy – scheduled for mid-January – of yet another Caesars unit. The actions combined form a package of measures that aim to restructure the huge debts of the casino brand and its annual interest payments on those debts. It could also give investors and creditors greater clarity on how their money is being used, said several analysts.
The consolidated company’s long-term debt reached US$24.2 billion at the end of June, according to other investment analysts.
Caesars was acquired and taken private in 2008 – shortly before the global financial crisis – in a US$30.7 billion leveraged buyout by private equity firms Apollo Global Management LLC and TPG Capital.
Debts have weighed on the company since then. Elements of the brand were taken back into public ownership in 2012 and 2013. But some investors felt the way those moves were structured protected some of the most profitable assets of the brand from Caesars’ creditors.
Caesars said in a press statement on Monday that the newly merged entity created from CEC and Caesars Acquisition Co would operate the brand’s flagship casino venue Caesars Palace (pictured) and own nine other casinos in Las Vegas – plus The Linq promenade and High Roller observation wheel on the Las Vegas Strip.
“The merger gives clarity for the bondholders for how some of the funding” would happen for the restructuring, Chris Snow, an analyst at research firm CreditSights Inc, told Bloomberg News.
The merged company will also own the brand’s online entertainment unit Caesars Interactive Entertainment Inc; Harrah’s New Orleans; Harrah’s Atlantic City; Harrah’s Laughlin and Caesars Acquisition’s current equity interest in Horseshoe Baltimore. All of the company’s properties will remain tied together through the Total Rewards players’ card system.
Reuters news agency on Monday quoted Alex Bumazhny, a Fitch Ratings Inc analyst, saying Caesars Acquisition would provide the parent company with cash for the operating unit’s creditors. The merged company will have a combined cash balance of US$1.7 billion, according to Caesars’ press release. Mr Bumazhny added it could resolve disputes over various asset transfers.
Under the deal, Caesars Entertainment will exchange 0.664 of its class A common stock for each outstanding share of Caesars Acquisition.
Caesars Acquisition was spun off from Caesars Entertainment Corp in 2013 to invest in an entity called Caesars Growth Partners LLC. The latter acquired from the operating unit casinos such as the Planet Hollywood casino-resort in Las Vegas and the investment in the Horseshoe Baltimore casino project.
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Vice-chairman and chief executive at Macau casino operator SJM Holdings