Date
17 October 2017
Caesars may be more vulnerable than its peers if any downturn follows Sunday's mass shooting on the Las Vegas Strip. Photo: Bloomberg
Caesars may be more vulnerable than its peers if any downturn follows Sunday's mass shooting on the Las Vegas Strip. Photo: Bloomberg

Caesars bankruptcy ends amid Asia market shift

Caesars Entertainment Corp. has an eye on expanding its Caesars, Harrah’s and Horseshoe brands in the United States and abroad after its casino operating unit emerges from nearly three years of bankruptcy as soon as Friday with US$10 billion less in debt, Reuters reports.

Industry analysts said it may be too late to catch up with rivals like MGM Resorts International, Wynn Resorts Ltd. and Las Vegas Sands Corp. that have spent years investing in high-growth Asian markets like Macau as US gambling has cooled.

“Twenty-five years ago Caesars was the premiere name internationally but they dropped the ball,” said Greg Bousquette of investment banking firm G.C. Andersen Partners, which advised unsecured creditors during the Caesars bankruptcy.

Caesars has spent years struggling to manage more than US$25 billion in debt, much of it taken on in 2008 when Apollo Global Management and TPG Capital led a leveraged buyout of the company. The operating unit filed for bankruptcy in early 2015.

Caesars emerges from Chapter 11 with a simplified structure by merging with Caesars Acquisition Corp. and other affiliates, and former creditors will hold a majority of the stock.

The US-focused company may be more vulnerable than its peers if any downturn follows this week’s mass shooting on the Las Vegas Strip, where Caesars owns some of its most valuable resorts and casinos and derives most of its revenue.

Las Vegas resort operators like Caesars may have to cut hotel rates and spend more on security and marketing to draw customers back, analysts said, though they expect business to bounce back over the longer term.

Caesars declined to comment on any potential decline in its business stemming from the shooting, which resulted in 59 deaths.

The company’s shares, which had lagged rivals through much of the bankruptcy proceedings, have risen 74 percent from a year ago, and investors last week snapped up its first bond offering since 2014.

“We’re primed for growth,” Caesars chief executive Mark Frissora told investors in September, pointing to a leaner post-bankruptcy structure, US$2 billion of cash and plans for branding and licensing agreements, and M&A.

The company in July hired two executives to oversee new projects and expansion in the United States and abroad.

Target markets include Brazil and Japan, which are considering opening up gaming and resorts licenses. Caesars has already received preliminary approval for a foreigners-only destination in South Korea.

But while Caesars spent years struggling under the debt from the leveraged buyout, its rivals were planting their flags in Macau and Singapore. Macau long ago surpassed Las Vegas in terms of gaming revenue.

Companies that already have experience operating in Asia are frontrunners to receive licenses to run Japanese casino resorts, according to analysts.

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CG

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