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CET Announces Sale of $2.2 Billion of Assets

Discussion in 'Casino Industry & Development' started by Blonde_4_ever, Mar 3, 2014.

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  1. Blonde_4_ever

    Blonde_4_ever "The Welfare Queen of Windsor"

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    CET Announces Sale of $2.2 Billion of assets including Bally's, the Cromwell, the Quad etc.

    But apparently we won't see any change...

    Caesars Entertainment and its affiliated companies will manage the purchased properties, allowing continued integration with the Total Rewards network and related synergies

    http://online.wsj.com/article/PR-CO-20140303-904494.html
     
  2. UTE

    UTE Plastics

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    Well, this should put the bankruptcy rumors to rest.

    Though technically a sale, this action is actually part of a complex financial restructuring to manage debt. Basically, Caesar's sold part of itself to itself.

    Bill
     
  3. SH0CK

    SH0CK Stylin' and Profilin' Quasi Tech Admin

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    Shell game anyone?
     
  4. NickyDim

    NickyDim VIP Whale

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    Really. Caesar's selling to Caesar's. I'm still holding my breath to the entire empire crumbling from it's own weight, and the weight of debt on top of it.
     
  5. hammie

    hammie VIP Whale

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    I don't know how this possibly puts aside bankruptcy rumors. This $1.8 B payment is almost equal to the projected loss for the year. And where is this money coming from, additional borrowings by the acquisition company for which Caesars is the majority owner?

    This announcement also comes before the year end is announced, and when a CEO starts to tout EBITA, adjusted earnings, he is just putting lipstick on a pig. They still have to refinance the debt in 2015 and continue to make payments on debt that is around $20 Billion, IIRC.

    What, no mention of buying Revel in Atlantic City for a bargain price of $200 million, Laissez les bons temps rouler!
     
  6. AndyAkeko

    AndyAkeko Time magazine's 2006 Person of the Year

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    That's what I was thinking, especially considering the three Vegas properties have all had extensive remodelling recently. I'm guessing that by being under a new corporation they are able to claim greater depreciation on the capital assets.
     
  7. Kickin

    Kickin Flea

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    There's nothing too complex about it any more, this has been par for the course for private equity owned companies. It basically opens the way for them to screw over unsecured bondholders (e.g. second-lien, subordinated debentures, other debentures w/o negative pledge clauses, etc) at the OpCo level since they strip away any assets covered under a general guarantee. There are some other threads about this after they started down this path of shifting things out of the OpCo.
     
  8. smartone

    smartone VIP Whale

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  9. Blacklegs22

    Blacklegs22 Low-Roller

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    Anyone have a feel for what affect (if any?) this will have on those of us with upcoming reservations at one of these properties? Also interested to know if these properties will still be under the Total Rewards "umbrella" for player comps, or will they be separated as Bills Gamblin' Hall was?
     
  10. SH0CK

    SH0CK Stylin' and Profilin' Quasi Tech Admin

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    Unless they sell a property outright to someone else, they won't make any changes. This is just for them to reposition debt onto a separate, but wholly owned company. Doing it this way doesn't cost them much, except attorney fees. Removing Total Rewards and putting something else in place would add more cost for no good reason.

    Short answer, nothing to worry about.
     
  11. Blacklegs22

    Blacklegs22 Low-Roller

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    And I guess the broader question for a financial expert like Kickin Chicken is: Is this a legitimate move towards fiscal stability/responsibility? Or is it merely another case of CET re-arranging the deck chairs on the Good Ship Loveman?
     
  12. Kickin

    Kickin Flea

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    What it does is open up an avenue for them to force through a debt restructuring on unsecured bondholders. If they tried doing it prior to moving assets out of the OpCo all lenders would have pari passu claims to any cash flows from those assets. But now they don't. The only way this happens is if the current bondholders are either weak/passive or are secondary holders who bought these at distressed levels. So original holders have already taken their losses. I've never looked at this company in detail, but have done a lot of distressed investing overseas, and as a secondary holder you're often better off letting the company force through a restructuring (where you would do well) since there will always be some original holders who try to holdout on any deal where they lose. So in that case you're interests are aligned more with the company than with your fellow bondholders simply because you bought in at very different prices.

    Whether you want to call it legitimate or responsible is a different story. When average people handle their personal finances this way (e.g. need debt relief, ask courts to protect certain assets, etc) they get labeled as irresponsible. But when billionaire private equity guys do it to companies over and over they wave the flag of capitalism and free-markets.
     
  13. Funkhouser

    Funkhouser In Charge of the Big Door

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    I am really curious how they selected the properties they were moving.
    Was it based on asset value, the amount of re-capitalization these properties need, or are they just slicing up the debt levels to more accurately reflect the bond holder positions.

    It seems to me that both The Cromwell and Quad will be cash generating engines once fully complete, where by Ballys could be a new revenue engine with a LGBT Drai's night spot.
     
  14. Kickin

    Kickin Flea

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    One factor would be to choose assets that aren't specifically pledged to any debt they want to restructure (e.g. second lien notes). They wouldn't be able to sell them without those lenders consent.

    What they're doing is putting the operating company in a position where the debt holders have no almost choice but to restructure. There won't be enough value left under general guarantees for them to see upside under bankruptcy.
     
  15. tringlomane

    tringlomane STP Addicted Beer Snob

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    Random thought:

    Where would our country be if 50%+ or more of US businesses behaved like CET?

    I also feel like a schmuck that I generally rather gamble at CET than MGM.
     
  16. jon95616

    jon95616 Low-Roller

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    Why move the money around?

    Why not sell one of their properties such as Rio to a different company and actually chip away at their debt?
     
  17. Film-Noir

    Film-Noir High-Roller

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    lol.
    Shell game all the assets to a fresh clean Company
    & leave all the debt w/in a Smelly Poo hole like the Flamingo, leave the bond holders w/toilet seat covers! :Þ
     
  18. oc_guy

    oc_guy Low-Roller

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    No offense to anyone who is a CZR bondholder, but Moody's has them rated Caa2 - WELL below junk status. I don't understand why people are suggesting they're "screwing" the bond holders. The bond holder should have been well aware of the risks, thats why the yields are over 10%.
     
  19. Kickin

    Kickin Flea

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    True that argument has merit for bondholders in the secondary market who buy these as a restructuring play. That's part of what my business involves. Which is why I said that secondary holders are often in conflict with the original lenders.

    But there's a problem with the premise that bondholders aren't being screwed, because all bondholders (secured and unsecured) are covered by a general guarantee over assets and pari passu claims on cash flows (unless otherwise noted). The courts have long established this. So by moving unpledged assets out of the company its almost like me getting in over my head with credit cards and potentially needing to file personal bankruptcy, but before I do I sell all my assets to my brother so my lenders can't get to them.

    If you want to look at another "moral" angle about these types of things consider this - the original lenders are by and large big institutional buyers. Bonds don't trade like stocks, and the original lenders aren't looking to make a quick buck. New issues are sold to institutions like pension funds, mutual funds, endowments, insurance companies, etc. who are looking for a decent yield to meet their obligations. Ultimately most original lender money belongs to average people who have little to no control over what they are invested in. They just open their retirement statement quarter and quarter and see it barely getting anywhere, or see their insurance premiums rise, and so on.
     
  20. Blacklegs22

    Blacklegs22 Low-Roller

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    Have to agree with both of these sentiments...and unfortunately, I'm thinking more and more companies ARE behaving like this, not a positive trend...just my sense of things...

    As for patronizing CET casinos...I'd love to escape their thrall-dom, but those damn "free" rooms keep leading me back...they are the crack cocaine of the casino industry! :wink2:
     
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