S&P sees risks and opportunities with Bill’s renovation
Standard & Poor's Ratings Services has issued a "B-'' corporate credit rating with a negative rating outlook to the Caesars Entertainment Corp. subsidiary planning to renovate Bill's Gamblin' Hall & Saloon on the Strip.
Caesars CEO Gary Loveman last week said the company plans to renovate the property and build a roof-top club with a pool in partnership with club developer Victor Drai. A timeline for the plan hasn't been disclosed.
Bill's has almost 200 hotel rooms, about 360 slot machines and 50 table games, making it one of the smaller Caesars properties. But it is strategically located near Caesars’ under-construction Linq entertainment district and the Flamingo and is across the street from Bally’s, the Bellagio and Caesars Palace.
In a report Friday on the Bill’s subsidiary informally called Caesars Drai's, Standard & Poor's also issued a "B" rating on a proposed $180 million loan that would finance the project. B-level ratings are in the speculative range, which isn't unusual for casino projects.
"Our corporate credit rating on Caesars Drai's reflects our assessment of the company's financial risk profile as 'highly leveraged' and our assessment of the company's business risk profile as 'vulnerable' according to our rating criteria," Standard & Poor's credit analyst Melissa Long said in a statement.
Standard & Poor's said its assessment of Caesars Drai's "reflects the aggressive financial policy and weak credit profile of the ultimate parent, Caesars Entertainment Corp."
"We believe that a bankruptcy at Caesars Entertainment Corp. could cause a bankruptcy at Caesars Drai's, if management decides it is in its best interest to include it in a broader bankruptcy proceeding," Standard & Poor's said in its report.
Analysts have warned of a possible Caesars' bankruptcy because of continuing losses by the company and its hefty $19.9 billion debt load. Loveman, however, last week said Caesars is working on de-leveraging initiatives.
As for Caesars Drai's, Standard & Poor's noted its position "in a highly competitive market with many casino and nightclub operators and risks associated with redeveloping and turning around an underperforming property, including attracting a new customer demographic.''
Besides the nightclub, Bill's will be repositioned as a boutique property, S&P said in its report.
"While the renovation project faces construction and execution risks, these risks are lower than those of a new build, in our view," the report said. "Our business risk assessment also takes into account the property's favorable location on the Las Vegas Strip, which lends itself to significant foot traffic, management's significant experience in operating casinos and nightclubs and the inclusion of the property in Caesars' Total Rewards network."