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Caesars Entertainment targeting January Chapter 11 bankruptcy (bloomberg)

Discussion in 'Casino Industry & Development' started by donfairplay, Nov 14, 2014.

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  1. donfairplay

    donfairplay Low-Roller

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    I didn't think this article would fit into the MGM takeover talks or the other Caesars threads, but it could be moved for a better fit.

    Bloomberg is quoting multiple sources saying that Caesars Entertainment will try to file a prearranged Chapter 11 bankruptcy before January 14. Some second-lien note holders may not get paid on December 15, which might trigger an involuntary bankruptcy that is definitely not Caesars preferred method.

    A long time coming. These LBO takeovers always seem to end badly, except for the LBO firm.

    ---

    http://www.bloomberg.com/news/2014-11-11/caesars-said-lining-up-creditors-for-january-bankruptcy.html

    Caesars, Creditors Said to Have Deal on Unit’s Bankruptcy
    By Laura J. Keller Nov 11, 2014 4:45 PM PT

    Caesars Entertainment Corp. (CZR) reached an agreement with key senior creditors on the outline of a debt restructuring plan that includes a prearranged bankruptcy for its largest unit as soon as January, according to two people with knowledge of the negotiations.

    Under the plan being negotiated by first-lien bondholders including Paul Singer’s Elliott Management Corp. and Pacific Investment Management Co., the casino company would put its Caesars Entertainment Operating Co. unit into Chapter 11 proceedings as soon as Jan. 14, said the people, who asked not to be identified because the discussions are private.

    Caesars Entertainment, the parent, rose 3.9 percent after trading ended on the New York Stock Exchange yesterday to $11.57. It fell 3.5 percent in the regular session.

    The proposal, which is the product of eight weeks of talks between the casino operator and its creditors, would help tame a $22.9 billion debt burden taken on six years ago in one of the biggest leveraged buyouts ever. The company needs the support of the creditor group in order to impose a reorganization that may offer little recovery for lower-ranking creditors.
     
    Last edited by a moderator: Nov 14, 2014
  2. mrstealth

    mrstealth High-Roller

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    Yeah, this was on lvrj 3 or 4 days ago, and that article explains it much better so the average person can understand it a little better. I don't think it comes as any surprise to anyone given the huge debt load they are carrying.

    Yesterday they announced that about 1% of the workforce will be reduced, however, it appears none of the layoffs will be on strip properties.
     
  3. Callahan

    Callahan Tourist

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    The press release announcing 1% of workforce being laid off probably is not worth the paper it's printed on.

    If you assume 680 hourly workers at 12.50 an hour, that's maybe 1.5 million a month in savings.

    .This move can't be more than the very tip of the iceberg.
     
    Last edited: Nov 14, 2014
  4. Piggylane

    Piggylane Well-Known Member

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    $12.50 an hour is too low. That's not burdened with overhead, such as benefits and taxes. You'd have to dig through their financials to find what their labor rates are but it would be a multiple of that. Yes, it would be a small number still but cash flow is what makes the payments.

    CET has operated on the philosophy of "build it, buy it and they will come" for quite a while. That fueled their expansion. Since money is cheap due to the Fed stimulus they borrowed anticipating future earnings. Sounds similar to the housing bubble from 2002-2008 and we know what happened there. We also know the end result of that too.

    CET will emerge a much smaller company in a few years. My bet is that many of the strip properties will be snatched up by hedge funds but operated by existing casino companies. I can't see MGM taking on more debt as their balance sheet isn't that great either. The whole venture has been mis-managed so Loveman and his team will have to move on.

    What is in store for the players is unknown and should be feared. How many years ago was it that the dreaded "resort fee" appeared? That drains millions from us to prop up them. Where did all the good blackjack go? Will the Field in craps all pay 1:1 now? I feel ashamed I even suggested that! Also, what happened to the 99 cent buffet? You get hassled sometimes for free drinks now, that's next to go for sure! Maybe we will all have to pay for parking too.

    The good old days are today folks. Enjoy them now for tomorrow they are gone!
     
  5. bubbakitty

    bubbakitty native Texan; born and bred.

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    I can honestly say my wife hit on the 7-7-7 blazing machine once walking through the Caesar's casino but otherwise we have lost at CET properties although had a good time. Finally (although not satisfying by any means) I see there are others losing investing in CET as well. Thought it was just us.....lol
     
    1st Super Bowl DT...Panthers / Browns no doubt
    Spur of momento trip
  6. BlacklabberMike

    BlacklabberMike VIP Whale

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    Ace said it best....

    [Last lines]
    Ace Rothstein: [narrating] The town will never be the same. After the Tangiers, the big corporations took it all over. Today it looks like Disneyland. And while the kids play cardboard pirates, Mommy and Daddy drop the house payments and Junior's college money on the poker slots. In the old days, dealers knew your name, what you drank, what you played. Today, it's like checkin' into an airport. And if you order room service, you're lucky if you get it by Thursday. Today, it's all gone. You get a whale show up with four million in a suitcase, and some twenty-five-year-old hotel school kid is gonna want his Social Security Number. After the Teamsters got knocked out of the box, the corporations tore down practically every one of the old casinos. And where did the money come from to rebuild the pyramids? Junk bonds. But in the end, I wound up right back where I started. I could still pick winners, and I could still make money for all kinds of people back home. And why mess up a good thing?
     
  7. fishyducky

    fishyducky Tourist

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    Just a question from a layman here. Do you guys think when the re emerge they will retain their nicer properties? Like Caesars, The Cromwell, Linq, etc? Maybe this was their plan during the last few years of the crazy building they have done?
     
  8. Piggylane

    Piggylane Well-Known Member

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    My bet is that Caesar's stays, the Linq (the venue, not the IP) does and Bally's & Paris because they are connected. Rio would be a nice picture for a bankruptcy filing cover, badly in need of an exterior make over and will be sold at a huge loss. Too bad, it has a nice convention center. Planet Hollywood goes, anything with Horseshoe in the name, the Harrah's name too. Not sure about the Linq. The old IP dump is connected to their new venue which is nice and it is cheap but who knows.

    This will give them an opportunity to try and bust the Unions too. They will be successful in some respects as they will have to cut costs everywhere so expect some labor strife. Vegas is a tough place to do that with the entrenched Unionization and politics so that should get interesting.

    Bottom line: there will be no winners here. Not the bond holders. Not the corporation. Not the shareholders. Not the workers. Not the players. Everyone loses.

    Let's hope I'm wrong and let's hope for the best. I'm not a fan of CET, don't play there now but used to be a high Diamond, always just short of Seven Stars until they pissed me off a few years ago. However there are good, hard workers that will be affected by all this and for that we all have to be mindful of the stress and pain they will be going through. If you've got a seven figure salary and lose your job in the restructuring, well, you were probably part of the problem. If you were making under $50K and lose your job then that's just terrible.
     
  9. hammie

    hammie VIP Whale

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    Caesars Entertainment Corp. is actually three operating companies, one of which is Caesars Entertainment Operating Company (CEOC), this is the one mentioned in the article that will likely go to Chapter 11. This division (CEOC) has about 80% of the debt and owns many of the regional casinos.

    The other operating company is Caesars Growth Partners, this division owns the Cromwell, the Linq, Pho and others. This company is traded on Nasdaq as Caesars Acquisition Corp. There is a third company that is called Caesars Interactive Entertainment which is involved in online gaming and other businesses. Ownership of these three companies would make a hillbilly blush as there's a lot of inter-related goings on among the three. I believe I read somewhere that Caesars on the strip is actually owned by two of these operating companies. One of the companies owns the Total Rewards business and so on.

    There was mention that the CEOC company is running out of cash and has to make a bond payment by January 15 th, so that's why they're targeting the 14th to file a prepackaged Bk. The first lien holders will get first dibs and what's left of the carcass will go to the rest. The folks I feel bad for are the small companies like linen supply and restsurant wholesalers who will take it in the shorts. This all reminds me of the line in Animal House when Otter is weeping over the destruction of his brother's new Lincoln......"you fu€ked up, you trusted us".
     
  10. REELmoneySlotFan

    REELmoneySlotFan High-Roller

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    To me this whole bankruptcy case feels like shady business. How is it possible that a company with a debt load of 22 billion dollars has the opportunity to spend 100's and 100's of millions to renovate/re-ivent the IP/Quad/Linq (talking about a giant screw up to rebrand the IP into the Quad to do it all over again in a couple of months spending millions again to rebrand the place into the Linq), renovate and rename Bill's Gambling Hall, renovate the IP hotel rooms and then screw over staff, bond holders and shareholders by jumping into a bankruptcy case as soon as all this is completed? If a civilian would pull a stunt like that, he'd probably end up in jail. This, to me, is wrong on so many levels.
     
  11. hammie

    hammie VIP Whale

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    Reel, this is an excellent observation. Over the past year or so, these guys pulled a bit of triage, moving the sick properties to the CEOC division and saddling it with a lot of debt. They moved the healthy properties like Planet Hollywood, Cromwell, Bally's Las Vegas to the Caesars Growth Partner (CGP) division.

    Apparently this is all legal, but what do I know, I am self employed, I pay my bills, make handshake deals, would never think of not paying a vendor even if I didn't get paid. Although I need my customers, I need my vendors even more and I need to keep my good name and reputation. My dad taught me to not sh!t where I eat.
     
  12. Krh2o

    Krh2o MIA

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    They are basically playing a Billion Dollar 3 Card Monte and the bond holders are on the other end of the table. It will be interesting to see how this all plays out. I am 95% sure that as far as the customer experience goes, nothing will change, a property or two might get sold, but the rest will be business as usual. I would just in case not be saving up reward credits past new years.
     
  13. earth-3

    earth-3 High-Roller

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    Those bond holder's must not be the brightest. We could see through the game CEOC was playing when they began moving their debt to this division, why didn't they? I feel sorry for them, but in away I don't.
     
    Last edited: Nov 14, 2014
  14. Iamrice

    Iamrice High-Roller

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    I think you nailed it with that one.
     
  15. UTE

    UTE Plastics

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    I agree fully. It's doubtful the vast majority of customers will notice or care about a bankruptcy action. It's simply a business maneuver which will allow CET to dump debt and continue on.

    Bill
     
  16. blackjacker2

    blackjacker2 Low-Roller

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    I think this is a self fulfilling prophecy, many issues mentioned by other posters above such as resort fees, poor comps, decent blackjack rules etc. On nearly all my previous trips prior to 2013 I played almost exclusively at Caesars and got some great comps. I play blackjack mostly under $100 a hand and that really rules out CET properties these days.

    I stayed at the Flamingo last year, but apart from one craps session and some low level roulette I played my blackjack elsewhere. I don't play for comps (I like the Beejay comp yourself approach), but it is nice to get some now and again. If the blackjack rules get better I may return to CET, but when you look at the blackjack survey, there's no reason to play at CET if you're under $100 a hand, not even to mention 6/5 which I hope will be eradicated at some point, but the uneducated blackjack players still seem to get drawn to it.
     
  17. leo21

    leo21 VIP Whale

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    There is not enough of a disincentive to keep companies from running up the credit card and declaring bankruptcy. And after Stations cashed out going public, declared bankruptcy and still managed to keep a lot of assets afterwards, I really don't see a disincentive in the gaming industry. There was a point in the recovery where both CET and MGM started to get their cash flow back. MGM started paying off debt, CET didn't. They refinanced the old and took on more and even though the parent companies could have invested more or at least eased up on the management fees that have been a big part of the cash flow problem. I started wondering if the plan was to declare bankruptcy at some point all along. Personally, I hope something happens where this gets F'ed up for them. At a minimum, Loveman needs to go. The wrong people - front line workers and the customers - have already had enough negative consequences from all of this crap.
     
  18. wigwam_salesman

    wigwam_salesman VIP Whale

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    This is BS. Not from you, but from CET. I can't say any more without potentially getting people in trouble but take that with the largest pinch of salt you can find.

    EDIT: I suppose I can say that like any company they have many operations that trade separately but they will count the 1% against their global figure of employees. A working example of that is that I worked for BskyB a decade ago, the British arm of News Corp. They told the press that they cut 0.5% of employees because from News Corp that was true, but all of those came from one division. Corporates are very good at burying bad news, even more so than the tabloids.
     
  19. wigwam_salesman

    wigwam_salesman VIP Whale

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    It's more to do with spreading the risk than avoiding responsibility overall in my responsibility.
     
  20. Funkhouser

    Funkhouser In Charge of the Big Door

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    At this point, I would like to see CET go thru bankruptcy and a partial breakup. I think way too much consolidation happened in Las Vegas that injured the consumer. Steve Wynn had it right when he said the gaming commisions allowed all this building and consolidation from companies who did not have the capital or their balance sheets in order. MGM was able to pull themselves up from the CityCenter fiasco and near collapse thanks to asian market earnings.


    A major failure of CET and loss by bondholders might scare the financial sector from funding another major casino buying spree and repopulate the strip with a bunch more independently owned properties. Rather than the MGM / CET duopoly.

    I'd love to see a Hilton, Marriott, or Hyatt pickup up some of CET properties or even another third party. Cosmo finally found a buyer, we have resorts project starting up. SBE to the north (if they manage to avoid the death spiral). Maybe this will be the kickoff of the de-consolidation wave. I think these properties could generate some positive cash flow with less debt and better management.
     
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