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Eldorado Resorts / CZR funding in trouble? Bloomberg article

Discussion in 'Casino Industry & Development' started by VegasBJ, Mar 16, 2020.

  1. VegasBJ

    VegasBJ VIP Whale

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    Don't know if this was posted last week, but here is an article regarding the funding for the Eldorado / CZR sale / merger.

    https://finance.yahoo.com/news/banks-promised-7-billion-casino-183449644.html

    The Purchase price was to be = $8.40 in cash plus .0899 in Eldorado shares. Eldorado is currently trading at $13.78

    $13.78 x .0899 = $1.2388, so the current price to CZR shareholders if the sale is completed would be $9.64. CZR bottomed today at $5.45, before recovering to $6.08. The market must think the transaction will not occur due to sudden lack of funding?
     
  2. Nevyn

    Nevyn VIP Whale

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    The article makes it sound like the banks are on the hook regardless, and they will be the ones in trouble if they can't find investment.
     
  3. Viva Las Vegas

    Viva Las Vegas Ramblin' Gamblin' Man

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    I came across a similar article yesterday. Elderado is less than a month from closing over $69, for over a 75% drop in less than twenty trading days. It's possible neither company makes it through the year without a bailout or purchase by another group.

    This arbitrage opportunity seems far too risky for me to consider.
     
  4. VegasBJ

    VegasBJ VIP Whale

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    The article does make it sound like that? But, can't they always pull the plug at the last second? Isn't all funding conditional until approved / actually funded?
    Yes, I agree on that!
     
  5. Viva Las Vegas

    Viva Las Vegas Ramblin' Gamblin' Man

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    No, these were my points beyond the linked article, if the entities run out of operating capital without a bailout or potential outside purchaser. Long way away from this scenario but it can happen.
     
  6. hammie

    hammie VIP Whale

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    Now that Penn Gaming, MGM, and Caesars have decided to spin off their properties into Real Estate Investment Trusts, I wonder what happens when the operators don’t have cash flow to pay the landlord?

    I guess Warren Buffet was correct: when the tide goes out, you see who’s swimming naked.
     
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  7. VegasBJ

    VegasBJ VIP Whale

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    I like that analogy!!
     
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  8. The Rumor

    The Rumor VIP Whale

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    that has been the risk with the model the whole time
     
  9. dankyone

    dankyone VIP Whale

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    I agree the market is telling you the transaction will not occur as currently planned and structured.

    I also agree the arbitrage trade is far, far too risky...sentiment is changing by the day and volatility is off the charts.

    HOWEVER, all parties seem very motivated to make the deal happen and it probably will, perhaps not on schedule, perhaps at a renegotiated price.
     
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  10. VegasBJ

    VegasBJ VIP Whale

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    CZR down $1.86 today to $4.22
     
  11. hammie

    hammie VIP Whale

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    Carl Icahn bought much of his position at around $9 a share, he owns about 28% of Caesars.
     
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  12. VegasBJ

    VegasBJ VIP Whale

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    So is that a positive or negative for the transaction to go through at these current prices? Most likely negative as I do not see him wanting to take that much of a hit on the merger
     
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  13. hammie

    hammie VIP Whale

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    He would rather eat his children than lose money, and he's very fond of his children.

    Total speculation, but maybe he takes shares of the combined company to reduce the cash component. From what I have read, he was involved in bringing these two companies together, I just don't see this blowing up. Reeg wanted this done in the 2nd quarter, maybe it gets delayed a bit.
     
    Last edited: Mar 17, 2020
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  14. dankyone

    dankyone VIP Whale

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    Considering how market sentiment has changed since the deal was announced, I think Icahn would be very pleased to get back $8.40 in cash plus whatever stake in the new company and will push for the deal to go through.

    Where he bought the position doesn’t matter now, it matters what he can get for it in today’s market conditions. You can’t easily sell a 29% stake in a company into the market without further depressing the price. He needs a buyout deal to happen, and no way would a new buyer today be willing to pay what Eldorado is paying.
     
  15. dankyone

    dankyone VIP Whale

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    Again, the market is telling you the transaction will not occur as originally announced.
     
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  16. rdwoodpecker

    rdwoodpecker Low-Roller

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    Both parties probably have an option to back out. The “clause” would be in the millions or they may re-price the buy out! Personally I would be okay with it falling thru for now.
     
  17. ffejry

    ffejry #1 Bears Fan

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    Would it be a good idea to buy stock in either of these properties while the prices are low?
     
  18. nostresshere

    nostresshere Mr. Anti Debit Card

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    Maybe

    What happens to your investment if they go bankrupt? Or just out of business?
     
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  19. 3544quebec

    3544quebec High-Roller

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    Its always good to buy things when the prices are low - and pray that they don't go lower!
     
  20. The Rumor

    The Rumor VIP Whale

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    what exactly is your edge that you're chasing?
     
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