Caesars stock falls; analysts say World Series of Poker could be spun off

Mona Shield Payne / Special to the Las Vegas Sun

Poker players compete on the first day of the World Series of Poker Main Event Saturday, July 7, 2012, at the Rio in Las Vegas. With Caesars Entertainment stock falling, analysts have suggested the company might spin off the WSOP.

Players Compete on Day 7 of WSOP Main Event

Robert Salaburu, a poker player from San Antonio Texas, competes in the World Series of Poker $10,000 buy-in, no-limit Texas Hold'em main event at the Rio Monday, July 16, 2012 Launch slideshow »

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.

Gaming

Share

Previous Discussion:

Discussion 2 comments

Only trusted comments are displayed on this page. Untrusted comments have expired from this story.

  1. These monopolies are top heavy and debt ridden. The time is coming when they'll have to pay up or start spinning off their properties to the highest bidder. MGM has already started with The Hotel. Caesars seems to be doubling it's efforts by building the Nobu Hotel and that Linq project.

    I sense Penn Gaming can't wait to take over one of these Strip properties.

  2. Like the banks, they are "Too Big To Fail". If they do file for Chapter 11, they should be chopped up like Baby Bells were in 1984 from Ma Bell! The Banks should of been chopped up too.