Operator News

US – Caesars announces CEOC’s emergence from bankruptcy

By Phil - 9 October 2017

Caesars Entertainment has said that the completion of its previously announced merger with Caesars Acquisition Company (CAC) and the conclusion of the restructuring of Caesars Entertainment Operating Company, Inc. (CEOC) and its debtor subsidiaries.

As a result of these transactions, the newly restructured Caesars Entertainment is positioned to further invest in its growth strategy and realise the benefits of a simpler and less leveraged capital structure.

“The conclusion of CEOC’s restructuring leaves Caesars Entertainment with an expected enterprise value of approximately $20bn based on yesterday’s closing prices. With reduced leverage, increased free cash flow and the new REIT structure, we are positioned with a solid foundation to pursue a diversified growth strategy,” said Mark Frissora, President and Chief Executive Officer of Caesars Entertainment. “Throughout the restructuring process, Caesars has invested significantly to upgrade and renovate its facilities. Total capex from 2015-2017 is expected to exceed $1.5bn, which will benefit the company going forward. We are also executing hundreds of initiatives to generate incremental revenue, as well as to enhance operational efficiency, guest experiences and employee engagement through technology-driven innovation and process improvement.”

Since the beginning of 2015, Caesars Entertainment has significantly improved its operations with over $700m of Adjusted EBITDA improvement and more than 770 basis points of Adjusted EBITDA margin expansion achieved. As a result of the restructuring, debt has been reduced by more than $16 billion, excluding the capitalization of the $640m per year lease obligation.

Caesars Entertainment has further enhanced its strong free cash flow profile through opportunistic refinancings that have resulted in combined interest savings of approximately $270m. These savings include the anticipated benefits of refinancing all Caesars Entertainment Resort Properties, LLC (CERP) and Caesars Growth Properties Holdings, LLC (CGPH) debt. These refinancings are expected to close later this year.

Caesars Entertainment is well placed to support continued investment in growth and value creation opportunities, as well as initiatives targeting further enhancements in customer satisfaction and employee engagement, including:

Leveraging Significant Presence in Growing Las Vegas – Caesars Entertainment will continue to update its room product in Las Vegas in line with its positive long-term outlook for this market. In addition, the Company is advancing the development of a convention center and other opportunities to monetize large, underutilized commercial scale properties adjacent to the Las Vegas strip in its real estate portfolio.

The operator stated: “Caesars Entertainment anticipates unlocking new opportunities for organic and inorganic growth across global markets supported by a strong free cash flow profile following CEOC’s emergence from bankruptcy. Caesars Entertainment is primed to further improve its financial and operating performance with hundreds of discrete projects under the Company’s Office of Continuous Improvement and through the deployment of new best-in-class, secure, cloud-based enterprise-wide technology solutions.With more than 50 million Total Rewards members, Caesars Entertainment is driving revenue growth through technology enhancements in its marketing and engagement channels, such as the application of machine learning to customer behavioral data. With approximately $2bn in cash, and growing cash flow, Caesars Entertainment is well positioned to invest in future growth.”

Under the terms of the previously announced merger, CAC stockholders each received 1.625 shares of Caesars Entertainment common stock per share of CAC Class A common stock. Additionally, CEOC has separated virtually all of its U.S.-based real property assets from its gaming operations with Caesars Entertainment continuing to own and manage the gaming operations. These real property assets are now held in a newly created real estate investment trust called VICI Properties, Inc. (“VICI”) owned by certain of CEOC’s former creditors.

Caesars Entertainment will pay rent to VICI as it continues to operate the properties. Material decisions related to these properties – such as renovations or other significant projects – will be made by Caesars Entertainment in collaboration with VICI’s board and management. Similarly, Caesars Entertainment and VICI may at times partner on these and other development and growth investments.