Facing a daunting $20 billion-plus debt load, casino giant Caesars Entertainment may be forced to raise funds by offering minority stakes in one of its most potentially lucrative divisions, Caesars Interactive, as well as in some of its brick-and-mortar casino properties. Ironically, the gambling conglomerate only recently purchased some of its own interactive division holdings; Buffalo Studios, a Santa Monica-based social and mobile games developer was acquired just as 2012 drew to a close, and Playtika, an Israeli social games company, was purchased by Caesars less than two years ago with a 51 percent stakehold.
Bad Timing For Caesars Entertainment
Adding to the good news/bad news timing is the Nevada Gaming Commission’s December 2012 state online gaming license approval, which could eventually allow Caesars to operate real-money poker games online, including their World Series of Poker brand. It’s anticipated that legal poker play online in Nevada could become available as early as first quarter 2013. Impending “yay” or “nay” online gambling legislation awaiting New Jersey Gov. Chris Christie’s signature could affect perceived value of the company’s Interactive division as well, in what’s expected to be an eventual $6 billion annual U.S. online player market.
Caesars plans to release its Q4 and FY 2012 earnings on February 25, but has already issued an advance view of its grim profit-and-loss statement for last year. Estimated fourth quarter losses could range anywhere from $452 million to $556 million, on earnings of $1.55 billion to $1.58 billion. Analysts had predicted less than half the high-projection loss figures, expecting approximately $268 million; the losses are also expected to be double Caesars reported $246.9 million Q4 2011 reports. Revenues are expected to come in well below earlier projections of $2.11 billion.
Caesars Debt Hurt By Hurricane
From $30 million to $35 million of that projected loss can be attributed to October 2012’s devastating Hurricane Sandy hit in New Jersey’s Atlantic City, where Caesars holds substantial investments.
Caesars says it plans to offer $1.5 billion in seven-year, 9% senior secured notes in an effort to pay off loans that have come due. It’s also trying to get on board the extremely successful Asian gambling junket with a proposed South Korean casino project, although most of the high-revenue American gaming operations are making bank out of Macau, a gambling Mecca operated under the auspices of the People’s Republic of China.
Finally, a recent Securities and Exchange Commission filing shows the possibility that Caesars may sell off shares in Planet Hollywood in Las Vegas and a proposed Baltimore, Maryland casino to help keep the sinking company afloat. The company has not posted a profit since 2009.