Debt-Riddled Caesars Reports $1.4 Billion Loss for Q2 as Sign of Bright Future
Posted on: August 4, 2017, 01:00h.
Last updated on: August 4, 2017, 01:52h.
Caesars Entertainment lost “only” $1.4 billion in the second quarter of 2017. That figure represents a $617 million improvement compared to last year’s Q2 losses of $2.1 billion.
Revenue for the period ticked up by 1 percent, to just over $1 billion.
Caesars has struggled with industry-high debt since January 2008, when a group of venture capitalists bought the company in a highly leveraged takeover that saddled the company with $25.1 billion in liabilities just as the global recession kicked in.
The casino giant declared bankruptcy in 2015.
Emerging from Chapter 11
Caesars main operating unit, Caesars Entertainment Operating Co (CEOC), is due to emerge from bankruptcy in early October, CEO Mark Frissora said in an earnings call this week. The unit will be spun off into a real-estate investment trust, while parent company Caesars Entertainment (CEC) will merge with another subsidiary, Caesars Acquisition Co (CACQ.O), with a view toward regrouping all its casinos and hotels together.
“We currently expect to complete the restructuring of CEOC and the merger of Caesars Entertainment and Caesars Acquisition in the first week of October, which will allow us increased flexibility to prudently invest in growth,” said Frissora, during Thursday’s earnings call.
The entire process will reorganize about $10 billion of the group’s debt and help alleviate some of its staggering interest payments.
The bankruptcy plan has been approved by the group’s shareholders and creditors but must still withstand the scrutiny of gaming regulators in Nevada, Louisiana, and Missouri.
Lucky Baccarat Players
Frissora told analysts and investors that despite “stronger gaming fundamentals across most of our properties,” Q2 revenues had been dented year-over-year by lucky gamblers, particularly in baccarat.
Above-average baccarat play resulted in a downturn of $41 million compared with the previous year, Caesars’ Chief Financial Officer Eric Heisson said.
Another factor hurting revenues has been widespread renovations across multiple Caesars properties. The company has about 6,000 room renovations that will be completed by the end of the year, Frissora said, but that work has taken those rooms off the market.
“Despite these second-quarter headwinds, we have seen improved performance in the third quarter and believe we are on track to surpass our initially disclosed 2017 full-year EBITDA projections by at least $40 million,” Frissora added.
Frissora said that as the company emerges from bankruptcy, it will launch a strategy to strengthen its loyalty program, and plans to make further investments in infrastructure with an eye toward long-term growth.
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