Caesars Entertainment Bounces Back from Bankruptcy Debt Hell with Positive Q1
Posted on: May 3, 2018, 03:00h.
Last updated on: May 3, 2018, 12:10h.
A leaner, meaner Caesars Entertainment is performing well post-bankruptcy reorganization. The company announced Wednesday that in Q1 of 2018 it posted net losses of “only” $34 million.
But that’s peanuts in comparison with the corresponding quarter of 2017, when the group’s losses were $507 million.
Meanwhile, Caesars reported a 104.1 percent revenue increase, to $1.97 billion, thanks in part to the performance of Caesars Entertainment Operating Company (CEOC). CEOC’s results were not included in the group’s financial results of 12 months ago because the unit was mired in chapter 11 bankruptcy as Caesars desperately attempted to reorganize some $10 billion of its $18 billion industry-high debt.
The group underwent a complete corporate restructure when CEOC emerged from bankruptcy last October. CEOC’s properties were spun off into a real estate investment trust (REIT), VICI Properties, which then leased them back to CEOC to operate. CEOC’s many debtors ultimately agreed to transfer debt into equity in the new REIT.
$2 Billion in Interest
The group acquired its debt when it was bought out in a highly leveraged takeover by hedge funds Apollo and TPG for $31 billion at the onset of the 2008 financial crisis. It was subsequently saddled with nearly $2 billion in interest payments every year – which exceeded its cash generation – and has failed to be profitable ever since.
But the evidence suggests that day will come, as CEO Mark Frissora vowed on Wednesday the group would continue to expand domestically and internationally and return shareholder value. With less exacting interest payments, cash flow increased dramatically, as the company narrowed its losses despite unfavorable conditions.
“Our first-quarter results exceeded our expectations, despite unfavorable year-over-year hold, several weather-related property closures and a shift in the Las Vegas convention calendar compared to the first quarter of last year,” said Frissora during Wednesday’s earnings call.
Caesars to Conquer Mexico, Dubai
While Caesars properties were busier this Chinese New Year than they had been for the past five years, Frissora said he felt there was “some lingering impact” from the October 1 Mandalay Bay shooting that had affected visitation.
Frissora highlighted several non-gaming projects currently in development, such as new resorts in Jumeirah Beach in Dubai and Puerto Los Cabos, Mexico, as well as a new tribal gaming project, the 71,000 square foot Harrah’s Northern California Casino.
The Dubai resort will include an observation wheel larger than the one at The Linq. Frissora said the Dubai and Mexico hotels are expected to open in 2019 and 2020, respectively.