Two days after sending CEO Gary Loveman out to change the conversation by hollering at the assembled masses in an inchoate G2E address, Harrah’s Entertainment quietly scuttled that much-talked-about IPO, evidently for fear it would be under-subscribed. Since the stated intent of the offering was to finish the Octavius Tower, build a shopping mall just off the Strip, and underwrite Harrah’s share of two Ohio casinos, this leaves any number of question marks hanging in the air. The company still intends to go ahead with the Caesars Entertainment rebranding (to use up stationery acquired when it took over a Hilton spinoff of that name?), although for the moment that’s like spritzing perfume on oil spill.
Since Harrah’s agreement with the majority owners of the moribund Foxwoods casino project in Philadelphia hasn’t progressed past a nonbinding set of terms, that prospect suddenly looks very bleak. (Unless you’re a rival city like Johnstown, in which case your chance of landing a casino license just improved.) Harrah’s had a lot riding on that IPO, turning Friday’s furtive revelation into a serious question about how the company intends to keep its myriad commitments.
As for the basic private-equity stratagem — “They bought companies with only a slim layer of equity cash up front, piled on debt, paid themselves dividends and attempted to sell them back to the marketplace.” — leaving its ethics (like phony “dividends”) aside, it’s amazing so many takers could be found for that pig in a poke. Nowadays, $10 billion here and $9 billion there actually looks like real money — with apologies to the late, great Sen. Everett Dirksen.
Gary Loveman needs to sell the Rio to raise some money to start and finish the casino projects mentioned above. I think the asking price for the Rio is around $500 million dollars. Penn National already bought the M Resort for $230 million dollars so they are not interested in the Rio. Penn National probably made an offer for the Rio (let’s assume around $300 million dollars) and Loveman said no. Now he will be stuck with the Rio until at least 2012. That is when I think the economy will start getting better in Las Vegas.
“The company still intends to go ahead with the Caesars Entertainment rebranding (to use up stationery acquired when it took over a Hilton spinoff of that name?)…”
I know it was a joke, but I want to see examples of the two letterheads when they’re done; that still doesn’t include the cost of business cards, etc. If I know corporations, Harrah’s has storage rooms full of stationery and blank forms labeled Caesars that they won’t even cut up into scratchpads.
One of the question marks is: What the heck are these people doing? They want to raise $billions to sink into new building projects, while they still owe $billions to creditors?
Another question mark is: Do they know the meaning of priorities?
$300 million is the absolute rock-bottom price for which The Rio can be sold, due to loan covenants. In fact, anything less than $450 million triggers certain penalties. Harrah’s is supposed to be in a good cash-on-hand position, so it’ll have to open the strongbox if it’s to fund that Christmas list of projects. Ohio is an important new source of revenue but my gut-level sense is that Foxwoods Philly is now toast.
Besides, it never made much sense for Harrah’s to kneecap both Chester Downs and its Atlantic City quartet by moving into downtown Philadelphia. If Harrah’s goes forward with that project, perhaps it’s time to show Loveman the door.
I can’t seem to find a direct email link, so sorry for posting this here, but thought you might be interested in some of the pre-renderings for Cleveland’s casino, although Rock Ventures is advising it’s too early for them to be considered actual and this appears to just be a leak.
http://blog.cleveland.com/architecture/2010/11/rock_ventures_casino_design_pr.html