Debt–ridden conglomerate Ceasars sets to purchase affiliate in an attempt to balance out its debts and start recovery.
As Caesars Entertainment Corporation faces criticism from its creditors, for spreading itself too thin among its divisions, a merger is in the making with Caesars Acquisition Co (CACQ). With this purchase Caesars Entertainment Corporation hopes to appease the restructuring of a strained division and also to stabilize its debt load.
The casino stalwart which has its home in Las Vegas has taken this move partly to reassure its pessimistic creditors. The merger with CACQ should provide the much-needed $1.7 billion in cash and will host the paramount gaming and hospitality company in Las Vegas.
Caesars sweetens its pitch to creditors
This will secure loans for the proposed bankruptcy deal with its creditors for its debt-ridden operating division. The corporation will file for Chapter 11 bankruptcy by January 15.Caesars hopes that its customers coming to the hotel won’t even be aware that there has been any changes whatsoever.
A financial analyst thinks the move will get creditors on their side as they will see the effort being made to avoid a drawn out bankruptcy procedure. In the past, creditors have slammed the corporation inability to keep assets in its operating arm.
The move then to merge with Caesars Acquisition may be a good one. CACQ has had the finances to buy three Las Vegas Strip properties including Bally’s, The Cromwell and The Linq Hotel & Casino. It also purchased Harrah in New Orleans for $1.8 billion from Caesars Entertainment Operating Co.
Now the debt-ridden flagship Caesars Palace remains the sole operating division on Las Vegas’ The Strip. Creditors accused Caesars Entertainment Corp of plundering and in accordance with US gambling laws, a lawsuit was filed against the casino giant last November, in Delaware.
• Merger to blend all – stock deal
• 38% stake for CACQ stockholders
• CEO will stay on board until 2016
According to Alex Bumazhny, a Fitch Ratings financial analyst, the merger “gives some teeth to the company’s guarantees to offer cash and back new deals with creditors, as it shops around its pre-packaged bankruptcy plan to get out from under $18.4 billion in debt by ridding itself of about $10 billion of it”.
‘No more lawsuit’ clause
If the merger didn’t happen then Caesars wouldn’t be able to procure the cash from the acquisition division, Bumazhny pointed out. The bankruptcy plan is also subject to there ‘being no more lawsuits against the company’ and Caesars continues its talk with creditors to lower its debt.
So while obstacles remain the scheme will get the corporation back on the road to success and keep the creditors quiet for some time, it is hoped. With the merger, shareholders will receive a 62% stake in the combined company. The rest will go to the shareholders of Caesars Acquisition.
Gary Loveman, Chairman and CEO of Caesars, says that Caesars Entertainment Corp will take Caesars Acquisition in an all-stock deal and that this “will result in a simpler and more straightforward corporate structure”. The move has seen an increase in shares for Caesars Entertainment Corp, rising to $1.51 last Monday and closing at $15.
Loveman also disclosed that the aim was to “focus on owning assets in destination and high-growth markets and businesses, while maintaining the benefits of operating our network and the Total Rewards loyalty program”. Once the merger is in full effect, entities will gain financial strength and “a much simpler and straightforward corporate structure” will be the outcome Loveman added.
The merged company will handle business as Caesars Entertainment. It is set to operate its casino-hotels including Planet Hollywood and online gambling sites in US, through its World Series of Poker brand will start out with $1.7 billion in cash.