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Caesars Entertainment Stock Continues to Fall as Analysts Suggest Debt May
Need to be Restructured and Assets Like the World Series of Poker be Spun Off

By Steve Green, Las Vegas SunMcClatchy-Tribune Regional News

Sept. 05, 2012--The stock of casino resort giant Caesars Entertainment Corp. of Las Vegas continues to fall this week as more analysts suggest it may have to restructure its debt and spin off assets like the World Series of Poker.

Caesars stock fell 10.7 percent last week, slid another 7 percent on Tuesday and opened down another 2 percent today at $6.55.

Caesars lost $241.7 million in the second quarter amid anemic spending by guests and intense competition in its big Las Vegas and Atlantic City markets.

In the latest report to raise doubt about Caesars' ability to meet its financial obligations absent some sort of restructuring of its $19.9 billion in debt, Fitch Ratings today revised its ratings outlook on Caesars from stable to negative.

Analysts are concerned that even as Caesars expands with projects like the Linq entertainment district in Las Vegas, it continues to lose money amid tough competition and it's paying out so much cash in interest that it doesn't have enough cash left over to properly maintain its existing hotels and casinos.

Fitch today estimated that a Caesars' subsidiary, Caesars Entertainment Operating Co., will burn through $450 million to $600 million in both 2013 and 2014. That represents cash flow losses and capital spending that will have to be covered by the parent company or the operating company (OpCo) taking on new debt.

Analysts say Caesars has adequate liquidity in the near term to meet its obligations, and it has sponsors with access to cash to cover continued losses and maintenance spending.

But the analysts are also more frequently asking if Caesars' biggest investors will be willing to continue pumping cash into a money-losing operation.

Fitch analysts today said that instead of sinking more cash into the operating company, Caesars' deep-pocketed sponsors Apollo Global Management LLC and TPG Capital LP may instead opt to restructure the operating company's debt.

"A spin-off of Caesars' Interactive unit or other means of monetizing the online business could be logical precursors to a restructuring. The parent guarantees OpCo's debt and sponsors, if electing to restructure OpCo, would likely want to extract value out of Interactive and not risk the entity being pulled into the restructuring proceedings," Fitch said in its report.

Caesars' interactive unit includes the World Series of Poker brand, social gaming company Playtika and Caesars' online gaming operations in the United Kingdom.

"Fitch believes that most of Caesars' current equity value is attributable to this unit, which would benefit materially if online gaming is legalized on the federal level in the U.S.," Fitch said in its report.

"Besides (possibly) entering into Chapter 11 (bankruptcy), Caesars may elect to execute debt exchanges, possibly for equity since the company is now public," Fitch added.

Caesars spokesman Gary Thompson said the company had no comment on the possible scenarios in the Fitch report but pointed out that Fitch affirmed Caesars' existing ratings, even as it changed the rating outlook to negative.


(c)2012 the Las Vegas Sun (Las Vegas, Nev.)

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