{"id":10899,"date":"2013-05-28T14:58:46","date_gmt":"2013-05-28T22:58:46","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=10899"},"modified":"2018-01-27T09:44:38","modified_gmt":"2018-01-27T17:44:38","slug":"the-caesars-squeeze","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/the-caesars-squeeze\/","title":{"rendered":"The Caesars squeeze"},"content":{"rendered":"

\"\"While the emperor (CEO Gary Loveman<\/strong>) may have escaped the Ides of March this year, knots of discontented tribunes are gathering on the Forum steps, muttering darkly.\u00a0 A cabal of hedge funds led by Silver Point Capital<\/strong> is looking at $4.6 billion that comes due a couple of years hence and wants to start talking now<\/a> about alternative methods of repayment. The funds’ money is secured by an unspecified number of Caesars Entertainment<\/strong> casinos, so you can see where this is going. However, they’ve not been able to get the ear of majority owners Texas Pacific Group<\/strong> and Apollo Management<\/strong>. The latter are expected to continue blowing off the dissident funds, at least according to one Wall Street Journal<\/em> source.<\/p>\n

Another problem for Silver Point and its allies is that Caesars carries its casinos at a value (nearly $16 billion) that would difficult (read<\/em>: impossible) to recover on the open market. The company’s present expansion strategy is reminiscent of the death throes of the Bernie Goldstein<\/strong> regime at Isle of Capri Casinos<\/strong>, when the company increased cash flow by dint of opening casino after casino, not by growing same-store revenue.<\/p>\n

\"\"Loveman may have two footholds in Cleveland<\/strong> and a third in Cincinnati<\/strong>. However, I am hard-pressed to agree with Deutsche Bank<\/strong>‘s Carlo Santarelli<\/strong> that these are “low-risk, high-reward” propositions. Caesars bears a small portion of the cost … and gets a correspondingly slice of the revenue (20%). Where would any of those be without sugar daddy Dan Gilbert<\/strong>? If Suffolk Downs<\/strong> happens — and Caesars does have well-placed political allies — it’s years away and will be another minority-investor proposition. So if Caesars makes a couple of hundred million here and there, it’s vanishing into a $21.3 billion chasm.<\/p>\n

\"\"Much hope is placed on the spinoff of Caesars Interactive<\/strong> and on going live<\/a> with the World Series of Poker<\/strong> brand online. The latter will surely crush Station Casinos<\/strong>‘ Ultimate Poker<\/strong>, which was rushed onto the market in a bare-bones form<\/a> whose salient feature appears to be its ability to inspire customer complaints. PokerStars<\/strong> claims Caesars was sufficiently desperate to attempt to sell the WSOP brand<\/a> (along with the unloved Rio<\/strong> hotel-casino), but the contention stretches credulity, even for a firm as strapped as Caesars.<\/p>\n

Even so, Seeking Alpha<\/em> last week advised shorting CZR shares, calling it “a fragile stock — it is grossly overvalued, has a terrible balance sheet and deteriorating free cash flow … one of the worst balance sheets I have ever seen. In fact, it seems as if the only thing this company is good at is taking on more debt<\/em>,” with no margin of safety should the economy go south again.<\/p>\n

\"\"Also, over $3 billion<\/strong> in additional debt is being carried off the books. Whatever cash the company takes in on its “Caesars Growth Properties<\/strong>” IPO may go right back out again in negative cash flow — $775 million just in the last four quarters, part of an accelerating downward spiral. The numbers just worse from there … so don’t be surprised that Silver Point et. al<\/em>. are trying to secure a chunk of the company while there’s still something tangible to be had.<\/p>\n","protected":false},"excerpt":{"rendered":"

While the emperor (CEO Gary Loveman) may have escaped the Ides of March this year, knots of discontented tribunes are gathering on the Forum steps, muttering darkly.\u00a0 A cabal of hedge funds led by Silver Point Capital is looking at … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":4367,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[28,154,14,37,85,62,112,71,25,57,38],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10899"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=10899"}],"version-history":[{"count":2,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10899\/revisions"}],"predecessor-version":[{"id":21015,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/10899\/revisions\/21015"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media\/4367"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=10899"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=10899"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=10899"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}