Caesars Entertainment Has One of the Worst Stock IPOs of 2012
WSOP Owners Shouldered With More Than $20 Billion In Debt
While America’s post election debate focuses on the nation’s impending fiscal cliff, Caesars Entertainment, owner and operator of the World Series of Poker and 52 casinos, has seen its stock tank due to slow growth and the gaming giant’s own financial woes.
With its stock closing down today more than 11 percent, Caesars (CZR) has now shed more than 70 percent of its value since a February 2012 initial public offering (IPO), making Caesars one of the worst performing IPOs of 2012.
The company, which was taken private in 2008 by Apollo Global Management, LLC and TPG Capital, has seen revenues hammered since the global recession.
According to data complied by Bloomberg, the company has reported 10 consecutive quarterly net losses and had $22.7 billion in total debt.
According to Caesars’ most recent quarterly report, its net loss for the nine months ended September 30, 2012 was $1.027 billion, up $560.8 million, or 120.1 percent, from the same period in 2011.
High interest expenses on corporate debt continue to plague the company. Its bonds are rated CAA1 which indicates “poor quality and very high credit risk” by Moody’s Investors Service, a bond credit rating agency. This rating significantly increases the interest rate a company must pay to finance its debt.
According to Bloomberg, Caesar’s bonds have an average rate of almost 15% and average weighted maturity of 5.7 years. The firm has $5 billion due in 2013 and $19.9 billion due by 2016.
Caesars’ main competitors, specifically MGM Resorts International (MGM), Las Vegas Sands (LVS) and Wynn Resorts (WYNN), have been awarded casino licenses in the booming gambling region of Macau, China, which boasts a gaming market that is more than five times larger than Las Vegas.
Caesars attempted to enter the Macau market with a casino of their own in 2007 by purchasing a plot of land currently housing a golf course for $578 million.
After being denied permission to build a casino on the land, Caesars is now shopping the property to interested buyers who may have better luck securing a gaming license from the Macau government.
Despite the mounting debt and stock plunge, Caesars Entertainment CEO Gary Loveman remains optimistic that he and his team can rebound strong.
According to an October 30, 2012 Wall Street Journal article, Loveman said, “We are in the midst of one of the greatest growth periods. The company’s financial health is much stronger than people think.”
Caesars Entertainment best chance to turn it all around hinge on a few key projects currently in the works. The company most recently sold its Harrah’s St. Louis property to Penn National Gaming for $610 million. A company spokesperson explained that the sale took place to provide Caesars liquidity to pay down some debt and renovate existing Las Vegas Strip properties.
One of those Strip properties is the much anticipated Quad Resort and Casino, which replaced the Imperial Palace and will be adjacent to a brand new shopping and entertainment complex known as the Linq.
Additionally, Caesars has a brand new Horseshoe brand property in Cleveland, with another in Cincinnati set to debut in the Spring of 2013. The company has also been awarded a license to construct and operate a Harrah’s brand property in Baltimore, which is scheduled to open in 2014.
Meanwhile, Caesars continues to push ahead with the poker industry’s most recognizable asset, the World Series of Poker. The company announced the dates for their 2013 series on Wednesday.
In 2012, the WSOP attracted 74,766 participants in a total of 61 events, building a total prize pool of more than $222 million – the largest in the event’s 43-year history.
Caesars Interactive Corp., which houses the WSOP, will use the brand to build a Nevada-based online poker site.
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