Caesars, the morning after

It’s been a day since Bloomberg News broke the story that Caesars Entertainment is gearing up for a Jan. 14 bankruptcy filing, the day Gary Loveman promised would never come. (By filing on the 14th, Caesars avoids paying $225 million to second-lien bondholders.) Well, here it is and it looks like it will work out pretty well for first-lien bondholders. “The creditors have a lot of control here. If they can’t get first-lien creditors to go along, they have a real problem,” Columbia University Law School‘s Ronald Mann told Bloomberg. It appears that first-lien creditors will get 90 cents on the dollar, in a mix of cash, securities and ownership in Caesars Entertainment Operating Co., the unit seen as most vulnerable to a bankruptcy filing. Second-tier creditors will be lucky to get some cheap trinkets.

During the waning months, one of Caesars’ bragging points has been that it had plenty of cash in the larder. Well, it looks like those good days are behind it, with KDP Investment Advisors analyst Barbara Cappaert estimating that the company would run out of dinero in two to three quarters. That’s not surprising given the way in which Caesars has been losing money hand over fist, in truly staggering sums.

Despite being in the ‘sell block,’ Caesars stock reacted positively to the news of the impending Chapter 11. However, Cappaert called the company’s finances “a mess” and Macquarie Securities analyst Chad Beynon said it was an investment prospect only for those with an interest in “special situations.” Despite all the havoc left in its wake, Caesars “should have no problem financing a foray into the Japanese market,” according to Reuters. Wall Street must have a masochistic appetite for risk where Caesars were concerned, perhaps to humor dealmaking private equity barons Leon Black and David Bonderman, who have reduced the once-proud company to pauper status.

S&G isn’t calling for the head of CEO Loveman, though. Every day, he has to go into the office and try to dig out from under the mess he created. Isn’t that punishment enough?

In the meantime, his projects include trying to rehabilitate the image of the Philippines, “considered a regulatory pariah” for ages, not least because Philippine Amusement
& Gaming Corporation (Pagcor) both owns casinos and acts as the country’s gaming regulators. It’s trying to polish its image under President Benigno Aquino. “Pagcor isn’t overly enthused about taking in Caesars, which has nowhere else to go in Asia,” writes Forbes‘ Muhammad Cohen and it says a lot that Caesars will venture where no other U.S. gaming firm will. According to President for International Development Steven Tight, Caesars would operate and brand the resort, but its equity contribution might be small. When you consider that Caesars might not even get licensed until 2019 or 2020, one shouldn’t put too many hopes on Caesars finding rescue in the Pacific Rim.