Caesars spooks Wall Street; Florida fumbles

Not surprisingly, Caesars Entertainment stock took a dip this morning. Why the lack of surprise? The company is further diluting its value by preparing to issue 10 million additional shares of common stock. “While we would view the announcement as a slight positive for the bank loans and notes, the proceeds would do little to improve the leverage situation at the company,” RBP Capital Markets analyst John Kempf wrote. He didn’t think the IPO was intended to de-lever the company; it’s probably so that Gary Loveman can buy more shiny objects. A recent and fairly damning analysis of Caesars concluded that “there is little upside value in this company.” The anticipated $260 million won’t make a dent in the company’s $24 billion debt load.

What is more interesting is the possibility that Steve Wynn will be piggybacking his Internet-gambling operation off some of Loveman’s Atlantic City computers, as Wynn Interactive goes live. It would explain Wynn’s new pact with Caesars-aligned 888 Holdings. The latter is quite an incestuous beast, also having arrangements with Treasure Island and — through the All American Poker Network — Wynn. AAPN is co-financed by Avenue Capital, which invests in Trump Entertainment Resorts. So 888 has its fingers in or near an impressive number of Las Vegas Strip and Boardwalk casinos.

Lawmakers in the Sunshine State are taking another run at casino expansion. Unfortunately, they’re going about it in ass-backwards fashion. The big idea? Put slots at dog tracks in places like Pensacola and Palm Beach. Yeah, that’ll get the job done … not! Florida‘s already a second-rate casino market. Why make it a third-rate one? Sheldon Adelson was right when he said that resort casinos were the way to go, although the scale and shape of his plan were wildly impractical.

Complicating the issue is the state’s compact with the Seminole Indians. If private-sector gambling is expanded, then Florida must permit it for the Seminoles as well. However, if the state wants Vegas-style casinos, it’s back to the prospect of having to abrogate its revenue-sharing arrangement with the Seminoles, forfeiting guaranteed annual revenue for a speculative bet on what a Venetian Miami might yield.

Unfortunately, the Lege has retained Spectrum Gaming Group to study a wide variety of expansion strategies. I say “unfortunately” because Spectrum produced an inflated projection of casino revenues for Ohio, resulting in much Buckeye State disappointment. Lawmakers would do well to shave at least 25% off whatever Spectrum tells them they’ll scoop up in taxes.