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Caesars narrows loss, offers little details on bankruptcy

9 Mar 2015

By Howard Stutz
LAS VEGAS -- Anyone hoping for extensive details Monday on the bankruptcy efforts covering Caesars Entertainment Corporation’s largest operating division was disappointed.

Caesars Chairman and CEO Gary Loveman, at the outset of the casino operator’s fourth-quarter earnings call, said he wouldn’t answer questions regarding the status of the restructuring of Caesars Entertainment Operating Co.

Nevertheless, Loveman did elaborate a little.

“The financial restructuring for CEOC is part of a comprehensive plan to strengthen CEOC and all of Caesars Entertainment and position them for sustainable, long-term growth and value creation,” Loveman said in prepared remarks.

Caesars, which placed CECO into bankruptcy in January, said Monday it lowered its net loss for the fourth quarter.

The casino operator lost $1 billion in the quarter that ended Dec. 31, an improvement over the net loss of $1.75 billion a year earlier. The loss translated into a loss per share of $7 compared with a loss per share of $12.83 in the 2013 fourth quarter.

Caesars grew revenue 6.3 percent in the quarter to $2.13 billion.

For all of 2014, Caesars said its net revenue increased 3.6 percent to $8.5 billion, while it reduced its net loss by 5 percent to $2.77 billion.

In a statement, Caesars said weak table game hold at Caesars Palace resulted in $60 million less in cash flow than a year ago.

Caesars, which has a gaming industry-high $22.8 billion in long-term debt, has been attempting to restructure its leverage for several years, filed a pre-arranged Chapter 11 bankruptcy in Chicago on CEOC.

The restructuring of CEOC will reduce the division’s $18.4 billion debt load by almost $10 billion. Caesars is seeking court approval to convert CEOC into a publicly traded real estate investment trust. CEOC controls Caesars Palace, Caesars Atlantic City, Harrah’s Reno Casino and Hotel and more than a dozen regional properties.

Loveman said the properties in the REIT will be leased for an annual payment of $635 million. Also, the restructuring will reduce CEOC’s interest payments from $1.7 billion to $450 million.

“The REIT structure is a highly efficient vehicle and has been gaining traction in the gaming and hospitality industry,” Loveman said.

KDP Investment Advisors gaming analyst Barbara Cappaert following the conference call that “it pains us to have to agree” with Caesars assessment that a quick resolution is needed for the bankruptcy restructuring.

“To be sure, we are not happy with any of the transactions which served to move assets off of the CEOC balance sheet and to strip away parent company guarantees,” Cappaert said. “However, litigating this could serve to drag out when creditors will see their claims settled and this too would impact eventually returns.”

Cappaert said several creditor groups continue to seek an examiner to investigate the company’s capital structure transactions which occurred in the last two years before the bankruptcy.

Last week, Caesars sold its 20 percent interest in three Ohio casinos to partner Detroit-based Rock Gaming, LLC.

A sales price was not disclosed. The deal was announced by Rock Gaming’s subsidiary, Rock Ohio Ventures. Caesars will continue to manage the properties, which will remain part of the company’s Total Rewards player loyalty program.

The casinos — Horseshoe Casino Cleveland, Horseshoe Casino Cincinnati and the ThistleDown Racino near Cleveland — are not part of the prepackaged bankruptcy.

Last month, Caesars said Loveman, 54, would step down as CEO on June 30 and will be replaced by Mark Frissora, the former chairman and CEO of Hertz Global Holdings. Frissora, who spent seven years with the automobile and equipment rental car company, will be “CEO designee” until July 1, when he formally becomes CEO.

Frissora did not participate in Monday’s conference call.

Loveman will remain as the company’s chairman following the transition.

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