VEGAS INC coverage
The publisher of a newsletter about Las Vegas is encouraging readers not to put money down on hotel reservations or make deposits in casinos operated by Caesars Entertainment, citing the prospect of a bankruptcy filing.
“In an abundance of caution, this newsletter advises you not to deposit any funds (deposits for hotel reservations, deposits in the cashier’s cage or not redeeming casino chips, etc.), in … Caesars hotels, until the situation at Caesars becomes clearer,” Publisher Bill Mandel said in his Openings and Closings in Las Vegas newsletter distributed Monday.
Mandel said he has been publishing the newsletter for 16 years and as of Sunday had 64,034 subscribers, mostly frequent Las Vegas visitors and gamblers.
While analysts have speculated on a Caesars bankruptcy filing, company insiders said executives aren’t considering it.
A UNLV gaming expert said that even if Caesars were to file for bankruptcy protection, it’s highly unlikely that it would affect hotel reservations and casino deposits.
“I’m struggling to remember any time when a gaming company’s bankruptcy filing directly affected customers,” said David Schwartz, director of the Center for Gaming Research at UNLV. “It would be a problem for shareholders but not customers.”
Schwartz cited the 2009 Chapter 11 bankruptcy filing of Station Casinos. The company sold assets and reorganized finances, emerging from bankruptcy in 2011.
“Nobody wants to declare bankruptcy, but in the case of the Fertitta family, they swallowed their pride and did it and the company emerged stronger,” Schwartz said.
A spokesman for Caesars today said the company has a long-standing policy of not commenting on rumors and speculation, and company representative Gary Thompson said the bankruptcy rumors have been circulating for months.
Reports of a possible Caesars bankruptcy heated up in April when Moody’s Investors Services downgraded the company’s credit rating to one of its lowest levels. Mandel cited the Moody’s report in his warning.
Moody’s analyst Peggy Holloway said in April that cash flow growth didn’t expand for Caesars in 2012-13 as a result of a demand drop fueled by customers spending less at casinos. She said consumers’ discretionary spending was reduced by higher taxes.
A key date occurs in January 2015 when $4.4 billion of mortgage-backed securities are scheduled to mature.
In the company’s most recent earnings report in July, Caesars noted that it had bought back $275 million in debt and that its financial strategy included beefing up its product offerings in Las Vegas and entering the Maryland casino market, breaking ground on a property on Baltimore’s harbor. The company also cut spending on marketing at some of its less profitable properties.
Caesars also is expected to generate new revenue when its online poker product, themed with its World Series of Poker brand, is licensed.
Schwartz said it’s evident that Caesars is looking to grab a larger piece of wallet share in Las Vegas with its Linq project, due to open early next year. Linq includes a pocket of restaurants and attractions in the heart of the Strip, anchored by the 550-foot High Roller observation wheel. He said many things can change for the company between now and the January 2015 securities maturation.
Investors have shown confidence in the company since its newest financial strategy was rolled out. The company’s stock price fell to $12.25 shortly after the Moody’s announcement but had risen to $21.84 by the end of August.