Caesars Entertainment Corporation recently announced a comprehensive financing plan designed to aid independent stock listing and significant de-leveraging of its subsidiary, Caesars Entertainment Operating Co. (CEOC). Following the announcement, share price of Caesars Entertainment surged 14.0% on May 7, 2014.
Caesars has undertaken a few steps to achieve its goal, which include amendment of CEOC’s credit facility; raising $1.75 billion of first lien debt to redeem all of CEOC's existing 2015 maturities and repay the latter’s existing bank debt, sell its 5.0% stake in CEOC to institutional investors, which would curtail $23.0 billion of debt; and expand CEOC's board of directors. Also, these include the sale of CEOC’s three Las Vegas properties to Caesars Growth Partners.
These actions are part of Caesars constant efforts to improve its financial condition after the leverage buyout in 2008. In 2008, Caesars Entertainment was purchased in a leveraged buyout valued at $30.7 billion and led by Apollo Global Management LLC (APO - Snapshot Report) and TPG Capital.
Since then, the company has undertaken a series of actions to improve its financial situation and has already lowered debt by $5.0 billion. As of Mar 31, 2014, Caesars' total long-term debt stood at $21.0 billion, approximately flat sequentially.
Also, the move comes in the wake of a decline in gambling revenues in Atlantic City and Tunica, Caesars Entertainment’s largest markets. Yesterday after the market closed, Caesars Entertainment posted dismal first quarter results with a loss of $1.96 per share, which was wider than the Zacks Consensus Estimate of a loss of $1.16 and the year-ago loss of $1.41. Revenue came in at $2.10 billion, down 1.9% year over year and missed the consensus mark of $2.16 billion.
The downside reflects continued softness in the domestic gaming market mainly in the Atlantic coast region, increased regional competition and impact of severe weather.
Caesars Entertainment is working on a number of expansion efforts and has centralized its operations to increase efficiency and curtail expenses. The refinancing actions and expansion initiatives would help the company to restructure its heavy debt and strengthen its core businesses, going forward.
Caesars Entertainment Corp. presently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the gaming industry include MGM Resorts International (MGM - Analyst Report) and Wynn Resorts Ltd. (WYNN - Analyst Report) . Both these stocks carry a Zacks Rank #2 (Buy).