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Caesars receives notice of default

Discussion in 'Casino Industry & Development' started by petunia, Jun 7, 2014.

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  1. petunia

    petunia Low-Roller

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  2. swuulumm

    swuulumm Low-Roller

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    hahaha

    we'll see how it plays out. No matter what, most of there vegas properties will survive one way or the other.
     
  3. BeeeJay

    BeeeJay President of The Red Lobster Hostess Satisfaction

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    going down as many here predicted.

    it will be nice to see the multiple new ownership groups unshackled by debt competing for our business when capitalism returns after the Vegas monopoly #1 is broken up

    goodbye 6/5 blackjack & boner deluxe :wave:
     
  4. Kickin

    Kickin Flea

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    “We will not allow our company, our employees and the communities in which we operate to be held hostage by a minority of holders whose interests are contrary to the long-term health of the company,” Gary Loveman, chairman and chief executive officer of Caesars, said in the filing.

    I swear I think they teach you this line the day you become a CEO. It's so unoriginal to try and cast your investors as the selfish bad guys.

    This is playing out exactly as we've predicted on this board but the big takeaway in my opinion is that list of some of the second-lien holders. They're all big and smart shops, especially Oaktree who are some of the sharpest distressed investors in the business. I've been involved with their Asia guys on some past restructurings out there and their US focus in their real expertise.

    CET et al isn't going to be able to cram something through on guys like Oaktree, Appaloosa, and Canyon. They have a lot more restructuring experience than the PE firms. I think a "forced" sale of some assets is a lot more likely now. Maybe Oaktree's Howard Marks will buy one of their casinos for himself. He lives in LA so it can be his weekend home.
     
  5. zamboni

    zamboni VIP Whale

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    They could always build a huge ferris wheel. I bet that would save them. WHAT?!?!?!? They already did that?!!?!?!? Limey!!
     
  6. dostoy

    dostoy Tourist

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    They have been moving properties and adjusting their capital structure for a couple of years now so that when CET files Chapter 11 there is nothing of value left in that corporation it will all have been moved to "healthier" corporate structures owned by the same capital firms. From CEOC to CERP to CGPH thus protecting any properties of value and sacrificing non performing entities and with the debt transferred to CEOC and CET (which will file chapter 11 eventually) the new corporate structures will be fairly healthy and owned by the same people. This is a tried and true corporate strategy where hedge funds and other capital venture firms recycling debt between companies using chapter 11 and other strategies to reduce debt on paper and turn profit on real property and operating margins. Apollo and TPG started all this with the leveraged buyout in 2008 when they saddled the new company with the debt from the purchase essentially making the company buy itself by placing the debt on the purchased company not on the hedge funds that made the purchase, that is how hedge funds work. Once the debt is cycled and the losses are written off pretty much the same corporate structure will emerge, without possibly a few of the lower performing properties though I doubt even that. You will see the same with Blackstone and Cosmo. It is how they dealt with Hilton, recycled debt to non performing entities that could be written off without sacrificing performing properties then rebuild balance sheets until you can IPO the company again and be a major shareholder. Pretty common in corporate finance, money is not real to them like it is to normal people, they deal in debt not cash. Penn National did something similar with PENN and GLPI spinning of the property holdings to a new corporation GLPI separating the business from the property to protect assets.
     
    Last edited: Jun 8, 2014
  7. Busyman

    Busyman VIP Whale

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    The High Roller is largely a waste. Cool to go up but way too expensive to ride.
     
  8. Kickin

    Kickin Flea

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    Blackstone bought Cosmo with cash, there was no additional debt issued. Maybe they'll leverage it up down the road to help finance other things but as of now its a completely different type of deal than CET entered into with TPG and Apollo.
     
    Last edited: Jun 8, 2014
  9. dostoy

    dostoy Tourist

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    Interestingly that is not entirely true. "Blackstone is using cash from its $13.3 billion real-estate fund, but later is expected to borrow around $1 billion toward the acquisition, say people close to the sale." You can be assured they will have the Cosmo unit borrow the $1 Billion to cover the purchase.

    Also in the same article they talk about Deutche Bank using the same type of scheme to rid itself of Cosmo. "The sale comes two years after Deutsche Bank, Germany's largest bank, formed an internal unit for unwanted assets to cut its balance sheet and improve its equity capital."
     
  10. Kickin

    Kickin Flea

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    Thanks, I stand corrected. But its unclear if the $1bn is going to go towards capex or if the cash purchase is just a bridge loan and they'll pay themselves partially back with the debt issue. In either case, its a small amount. Also as an LBO shop you're practically doing a disservice to your investors by not borrowing, its what the L in LBO stands for - i.e. if you're a pro and think its a great investment why not lever up my equity? The problem is on the CET deal they took that thinking to its ridiculous extreme.

    The DB thing is very different though. Every bank has a book of unwanted assets, its usually overseen by their special situations group and sold piecemeal to hedge funds and other investors but since the credit crisis they've become much bigger and independent units. DB used to have the biggest proprietary distressed asset book in Asia who we did a lot of business with, maybe too much because they'd send me crates of expensive wine all the time just for the heck of it and I don't even drink much wine.

    Personally I think that DB, as a reluctant owner of Cosmo, did a much better job with it than I would have expected earlier on.
     
  11. zamboni

    zamboni VIP Whale

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    Can someone explain how Garry Loveman has kept his job?
     
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