Caesars Entertainment share price up, unveils restructuring program details

December 29, 2014 3:27 pm

A month after Caesars Entertainment Corp. inked an all-stock deal to merge with affiliate Caesars Acquisition Co, announced additional information related to its restructuring plan.

Caesars Entertainment Operating Co. will be transformed into an operating and a property company, managed and owned by a real-estate investment trust. Earlier this month the company said it would file for Chapter 11 bankruptcy by the middle of January. The move is projected to decrease its debt from $18.4 billion to $8.6 billion.

In line with its restructuring plan the company would get a $160-million-per-year lease for the Caesars Palace Las Vegas unit and another one intended for other facilities. Currently Caesars Entertainment Operating manages 50 casinos in 13 US states and five countries.

The news came in the same month that Caesars Entertainment announced its merger with Caesars Acquisition in a deal that was aimed to restructure debt without the need of major outside financing.

The deal was approved by company creditors Apollo Global Management and TPG Capital, who initiated a $30 billion leveraged buyout in 2008 and had a 66% stake in Caesars Acquisition via their Hamlet Holdings. In line with the terms of the deal Caesars Entertainment will merge its share in facilities, including Planet Hollywood and Bally’s Las Vegas, with Caesars Acquisition.

“Upon completion of the merger and restructuring, Caesars Entertainment Corp. entities will be financially strong, with significantly reduced leverage and a much simpler and straightforward corporate structure,” said Gary Loveman, Chairman and Chief Executive Officer of Caesars Entertainment.

As a number of rivals, Caesars Entertainment has suffered in the US due to the fast increasing competition. Additionally the company has failed in its China operations, where Caesars Entertainment tried to expand in Macau.

Since the leveraged buyout, the company has been struggling to pay its debts and has shifted its attention to capital-markets transactions.

Caesars Entertainment Corp gained 1.60% on December 23rd and an additional 0.13% on December 26th to close at $15.46, marking a one-year decrease of 26.76%. The company is valued at 2.23 billion. According to the Financial Times, the 4 analysts offering 12-month price targets for Caesars Entertainment Corp have a median target of $9.50, with a high estimate of $17.00 and a low estimate of $9.00. The median estimate represents a 38.55 % decrease from the last price of $15.46.

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