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Cwasars to Close Showboat Casino in Atlantic CityPrev TopicNext Topic
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OVER REACH LEADS TO GREED !!!
Eddessa_KnightWhy the Heart of the Las Vegas Strip May Soon Be Bankrupt
The Las Vegas Strip could be heading to its largest bankruptcy ever. Image source: public domain
Las Vegas has made more than a few losers in its day but it's not usually the house that ends up going broke. But that may be exactly what's happening in the heart of the Las Vegas Strip.
One of the biggest buyouts ever attempted was pulled off in Las Vegas when Apollo Global and TPG Capital bought Harrah's Entertainment for $30.7 billion in 2008. Billions of dollars in debt was piled onto Harrah's -- or Caesars Entertainment (NASDAQ: CZR ) as it's known today -- balance sheet and before long the bet started going bad. The recession devastated Las Vegas' gaming revenue and an expansion of regional gaming around the country sank any recovery hopes Caesars had. Now, it's becoming apparent Caesars may succumb to over $25 billion in debt.
The impact on Las Vegas could be significant considering the fact that Caesars and its subsidiaries own nearly half of the Las Vegas Strip. Caesars owns its namesake Caesar's Palace as well as most of the property from Planet Hollywood all the way down to Harrah's Las Vegas. The properties make up the heart of the Las Vegas Strip and unless there's a solution worked out soon they may be in bankruptcy just after the turn of the new year.
How Caesars Entertainment got here
A highly leveraged balance sheet, the recession, and expansion of regional gaming was only part of the problem for Caesars Entertainment. After the company went public, it began splitting off subsidiaries like Caesars Acquisition Company (NASDAQ: CACQ ) to own its most valuable assets, leaving most of the debt with the "old" Caesars. The start of this dizzying structure can be seen in the image below from a presentation late last year.
A look at Caesars' corporate structure as proposed late last year. Image source: Caesars Entertainment
For Caesars, the problem creating so many subsidiaries is that debt holders who financed the company were intentionally cut out from the valuable assets as they were transferred to new companies. This would be like getting a mortgage to buy a home and then jacking up the home and moving to new land, leaving the bank with no collateral but the land where a house once sat.
Why Caesars is drowning in debt
None of this would be a problem if Caesars was able to pay its bills, but with $25 billion in debt and losses mounting every quarter the company can only pay its bills as long as it can get new debt. That's a problem now because at least four creditors have claimed Caesars defaulted when it transferred assets to new subsidiaries, which would trigger a default of all of its debt.Caesars is aware of this and has been negotiating with creditors to refinance debt through new debt and equity offerings. But those talks reportedly broke down earlier this week and low level creditors were never happy with a proposed agreement.
Wynn Las Vegas and The Venetian Las Vegas are both more profitable than any of Caesars' resorts. Image source: The Motley Fool
If creditors don't agree to refinance debt Caesars could be forced into bankruptcy, the largest we've seen in Las Vegas. Given the massive debt load and questions surrounding the legality of the company's new legal structure I wouldn't doubt that's where we're heading.
How this will impact the Las Vegas Strip
The impact of a Caesars Entertainment bankruptcy on Las Vegas could be as small as a ripple or as big as a tidal wave.There may be minimal short-term impact felt if creditors who Caesars owe money agree to restructure debt, take equity in the company, and don't force a protracted negotiation. But tensions between debt holders and Caesars are heating up and they may force a more complete breakdown of the company.
If Caesars is forced to break up into smaller pieces or sell off assets we could see a reshaping of The Strip. We could see valuable assets sold to rivals with strong balance sheets and underperforming assets could be sold to someone looking to demolish them for a new megaresort.
A bankruptcy of Caesars Entertainment could bring a wave of change to the Las Vegas Strip but no matter what happens the heart of The Strip will likely change forever. Caesars can't keep its business afloat with $25 billion of debt and by the end of 2015 the company will likely look very different than it does today.
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Egg Harbor twp.south Jersey shore
United States
Member #112,963
June 29, 2011
4,160 Posts
OfflineOVER REACH LEADS TO GREED !!!
Eddessa_KnightWhy the Heart of the Las Vegas Strip May Soon Be Bankrupt
The Las Vegas Strip could be heading to its largest bankruptcy ever. Image source: public domain
Las Vegas has made more than a few losers in its day but it's not usually the house that ends up going broke. But that may be exactly what's happening in the heart of the Las Vegas Strip.
One of the biggest buyouts ever attempted was pulled off in Las Vegas when Apollo Global and TPG Capital bought Harrah's Entertainment for $30.7 billion in 2008. Billions of dollars in debt was piled onto Harrah's -- or Caesars Entertainment (NASDAQ: CZR ) as it's known today -- balance sheet and before long the bet started going bad. The recession devastated Las Vegas' gaming revenue and an expansion of regional gaming around the country sank any recovery hopes Caesars had. Now, it's becoming apparent Caesars may succumb to over $25 billion in debt.
The impact on Las Vegas could be significant considering the fact that Caesars and its subsidiaries own nearly half of the Las Vegas Strip. Caesars owns its namesake Caesar's Palace as well as most of the property from Planet Hollywood all the way down to Harrah's Las Vegas. The properties make up the heart of the Las Vegas Strip and unless there's a solution worked out soon they may be in bankruptcy just after the turn of the new year.
How Caesars Entertainment got here
A highly leveraged balance sheet, the recession, and expansion of regional gaming was only part of the problem for Caesars Entertainment. After the company went public, it began splitting off subsidiaries like Caesars Acquisition Company (NASDAQ: CACQ ) to own its most valuable assets, leaving most of the debt with the "old" Caesars. The start of this dizzying structure can be seen in the image below from a presentation late last year.A look at Caesars' corporate structure as proposed late last year. Image source: Caesars Entertainment
For Caesars, the problem creating so many subsidiaries is that debt holders who financed the company were intentionally cut out from the valuable assets as they were transferred to new companies. This would be like getting a mortgage to buy a home and then jacking up the home and moving to new land, leaving the bank with no collateral but the land where a house once sat.
Why Caesars is drowning in debt
None of this would be a problem if Caesars was able to pay its bills, but with $25 billion in debt and losses mounting every quarter the company can only pay its bills as long as it can get new debt. That's a problem now because at least four creditors have claimed Caesars defaulted when it transferred assets to new subsidiaries, which would trigger a default of all of its debt.Caesars is aware of this and has been negotiating with creditors to refinance debt through new debt and equity offerings. But those talks reportedly broke down earlier this week and low level creditors were never happy with a proposed agreement.
Wynn Las Vegas and The Venetian Las Vegas are both more profitable than any of Caesars' resorts. Image source: The Motley Fool
If creditors don't agree to refinance debt Caesars could be forced into bankruptcy, the largest we've seen in Las Vegas. Given the massive debt load and questions surrounding the legality of the company's new legal structure I wouldn't doubt that's where we're heading.
How this will impact the Las Vegas Strip
The impact of a Caesars Entertainment bankruptcy on Las Vegas could be as small as a ripple or as big as a tidal wave.There may be minimal short-term impact felt if creditors who Caesars owe money agree to restructure debt, take equity in the company, and don't force a protracted negotiation. But tensions between debt holders and Caesars are heating up and they may force a more complete breakdown of the company.
If Caesars is forced to break up into smaller pieces or sell off assets we could see a reshaping of The Strip. We could see valuable assets sold to rivals with strong balance sheets and underperforming assets could be sold to someone looking to demolish them for a new megaresort.
A bankruptcy of Caesars Entertainment could bring a wave of change to the Las Vegas Strip but no matter what happens the heart of The Strip will likely change forever. Caesars can't keep its business afloat with $25 billion of debt and by the end of 2015 the company will likely look very different than it does today.
Extraordinary Popular Delusions & the Madness of Crowds -- Charles Mackay LL.D.
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Egg Harbor twp.south Jersey shore
United States
Member #112,963
June 29, 2011
4,160 Posts
OfflineExtraordinary Popular Delusions & the Madness of Crowds -- Charles Mackay LL.D.
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Which Las Vegas Casino Could Win Most From Caesars Entertainment's Demise?
The view from gambling ground zero are principally:
1.MGM
2. Sands
We'll see where the ball lands.....
Eddessa_KNIGHT
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Which Las Vegas Casino Could Win Most From Caesars Entertainment's Demise?
The view from gambling ground zero are principally:
1.MGM
2. Sands
We'll see where the ball lands.....
Eddessa_KNIGHT
Eddessa_Knight
Caesars skips $225 million interest paymentCaesars Entertainment Corp. made good on previous predictions and skipped a $225 million interest payment Monday while the casino operator continued debt reduction talks with lenders. -
Sam Nazzarian & SLS several short month later after glitzy opening & just before gaming board hearing
Ran out of steam, & luck
Eddessa_Knight
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Eddessa_Knight
Caesars skips $225 million interest paymentCaesars Entertainment Corp. made good on previous predictions and skipped a $225 million interest payment Monday while the casino operator continued debt reduction talks with lenders. Caesars’ main unit to file for bankruptcy in JanuaryCaesars Entertainment Operating Co., the main operating unit of Las Vegas-based Caesars Entertainment Corp , said Friday it would file for Chapter 11 bankruptcy protection by mid-January to cut its burgeoning debtAnd away we GOOOoooooo >>>>>>>>
Eddessa_Knight
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Arab Money on losing bet in LV
Eddessa_Knight
Las Vegas Mega-Flop: How Dubai Lost Billions Gambling on Vegas Hotels
December 21, 2014When the Dubai government's investment arm, Dubai World, rode into Las Vegas in 2007 with a multibillion-dollar plan to buy a big stake in The Strip, it seemed a brilliant move. It bought a large holding in MGM Resorts International (NYSE: MGM ) and a 50% stake in the half-finished CityCenter complex, cementing its role as a central player in Las Vegas.
Dubai World paid nearly $5 billion for the assets, but the bet quickly soured. The recession ravaged Las Vegas, and CityCenter never performed as well as expected. Seven years later, the United Arab Emirates' leading city has lost billions in Las Vegas.
MGM Grand is MGM Resorts' flagship hotel and a cornerstone of the Las Vegas Strip. Image source:Wikimedia Commons.
MGM is a fraction of the company it once was
When Dubai World made its original deal with MGM, it intended to invest $2.7 billion in CityCenter and $2.4 billion in MGM stock, offering $84 per share for 28.4 million shares. But the stock ran well over its $84 tender offer price, so Dubai World didn't actually acquire 28.4 million shares. This might be the only silver lining in Dubai World's bet on Las Vegas, and it was unintentional.Dubai World instead acquired 21.05 million shares for a total cost of $1.74 billion. The acquisitions were made between $80 and $84 per share, more than quadruple the stock's current price of $19.10. But the stock loss could pale in comparison to what CityCenter cost Dubai World.
CityCenter is one of the biggest resorts in Las Vegas, but also one of the least profitable. Image source: Wikimedia Commons.
CityCenter might be the biggest disappointment in Las Vegas history
CityCenter was supposed to be the next-generation megaresort, with condominiums, restaurants, nightclubs, shopping, a spa, and much more. But the project never quite lived up to its billing, and the financial results have been less than stellar for MGM Resorts and Dubai World.Even if we gloss over the fact that the Harmon tower, which cost $400 million, is being torn down without ever having residents move in, the rest of CityCenter has been a disappointment. In the last 12 months, CityCenter has reported just $18.3 million in operating profit and $333 million in EBITDA "related to resort operations," which is a generous valuation metric.
If we use the reported EBITDA figure, a common valuation metric in gaming, the value of Dubai World's stake in CityCenter is a big loss. MGM as a company is trading at an enterprise value of 8.6; using the same multiple for CityCenter provides a total value of $2.86 billion, probably the right ballpark considering the recent $1.73 billion sale of the neighboring Cosmopolitan.
Pull out CityCenter's $1.55 billion in debt and MGM's 50% stake, and Dubai World's holding in CityCenter is only worth about $656.9 million. I think this is a reasonable valuation, but MGM has put the book value of Dubai World's stake at $1.325 billion, so I've used the range between the two figures below.
2007
Today
CityCenter-50% Stake
$2.96 billion
$656.9 million-$1.325 billion
MGM Stock
$1.74 billion
$520 million
Total
$4.68 billion
$1.18 billion-$1.85 billion
Source: MGM Resorts and author's calculations.
These values assume Dubai World could even sell its CityCenter stake, a transaction that would face significant scrutiny from MGM and regulators in Nevada. But even using these metrics, Dubai World has lost 60%-75% of its original investment. You might think this would have taught Dubai, and the rest of the UAE, a lesson about betting on Las Vegas.
Not the last lesson learned on the Las Vegas Strip
Despite Dubai's losses, other members of the UAE's inner circle continue to bet on Las Vegas. Hakkasan Group, funded by Abu Dhabi's Sheikh Mansour bin Zayed Al Nahyan, is taking over the Las Vegas restaurant and nightclub scene. It built the $100 million Hakkasan nightclub in the MGM Grand, bought Enlightened Hospitality Group this year, partnered with MGM to build nongaming resorts, and is rumored to be acquiring Morgans Hotel Group's stake in Light Group.Dubai World's acquisition of MGM shares and half of CityCenter was made at the peak of the real estate boom, and I can't help but wonder if Hakkasan is betting on Las Vegas at the peak of the party scene. At least this time around there aren't billions of dollars at stake, just a couple hundred million. That's a low-stakes gamble compared to Dubai World's bet on Las Vegas
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Caesars’ main unit to file for bankruptcy in JanuaryCaesars Entertainment Operating Co., the main operating unit of Las Vegas-based Caesars Entertainment Corp , said Friday it would file for Chapter 11 bankruptcy protection by mid-January to cut its burgeoning debt
And away we GOOOoooooo >>>>>>>>
Eddessa_Knight
Caesars Entertainment to buy affiliate
LAS VEGAS (AP) — Caesars Entertainment Corp. says it will buy an affiliate as it tries to smooth the reorganization of a struggling division and balance its debt over load.
Eddessa_Knight
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Egg Harbor twp.south Jersey shore
United States
Member #112,963
June 29, 2011
4,160 Posts
OfflineArab Money on losing bet in LV
Eddessa_Knight
Las Vegas Mega-Flop: How Dubai Lost Billions Gambling on Vegas Hotels
December 21, 2014When the Dubai government's investment arm, Dubai World, rode into Las Vegas in 2007 with a multibillion-dollar plan to buy a big stake in The Strip, it seemed a brilliant move. It bought a large holding in MGM Resorts International (NYSE: MGM ) and a 50% stake in the half-finished CityCenter complex, cementing its role as a central player in Las Vegas.
Dubai World paid nearly $5 billion for the assets, but the bet quickly soured. The recession ravaged Las Vegas, and CityCenter never performed as well as expected. Seven years later, the United Arab Emirates' leading city has lost billions in Las Vegas.
MGM Grand is MGM Resorts' flagship hotel and a cornerstone of the Las Vegas Strip. Image source:Wikimedia Commons.
MGM is a fraction of the company it once was
When Dubai World made its original deal with MGM, it intended to invest $2.7 billion in CityCenter and $2.4 billion in MGM stock, offering $84 per share for 28.4 million shares. But the stock ran well over its $84 tender offer price, so Dubai World didn't actually acquire 28.4 million shares. This might be the only silver lining in Dubai World's bet on Las Vegas, and it was unintentional.Dubai World instead acquired 21.05 million shares for a total cost of $1.74 billion. The acquisitions were made between $80 and $84 per share, more than quadruple the stock's current price of $19.10. But the stock loss could pale in comparison to what CityCenter cost Dubai World.
CityCenter is one of the biggest resorts in Las Vegas, but also one of the least profitable. Image source: Wikimedia Commons.
CityCenter might be the biggest disappointment in Las Vegas history
CityCenter was supposed to be the next-generation megaresort, with condominiums, restaurants, nightclubs, shopping, a spa, and much more. But the project never quite lived up to its billing, and the financial results have been less than stellar for MGM Resorts and Dubai World.Even if we gloss over the fact that the Harmon tower, which cost $400 million, is being torn down without ever having residents move in, the rest of CityCenter has been a disappointment. In the last 12 months, CityCenter has reported just $18.3 million in operating profit and $333 million in EBITDA "related to resort operations," which is a generous valuation metric.
If we use the reported EBITDA figure, a common valuation metric in gaming, the value of Dubai World's stake in CityCenter is a big loss. MGM as a company is trading at an enterprise value of 8.6; using the same multiple for CityCenter provides a total value of $2.86 billion, probably the right ballpark considering the recent $1.73 billion sale of the neighboring Cosmopolitan.
Pull out CityCenter's $1.55 billion in debt and MGM's 50% stake, and Dubai World's holding in CityCenter is only worth about $656.9 million. I think this is a reasonable valuation, but MGM has put the book value of Dubai World's stake at $1.325 billion, so I've used the range between the two figures below.
2007
Today
CityCenter-50% Stake
$2.96 billion
$656.9 million-$1.325 billion
MGM Stock
$1.74 billion
$520 million
Total
$4.68 billion
$1.18 billion-$1.85 billion
Source: MGM Resorts and author's calculations.
These values assume Dubai World could even sell its CityCenter stake, a transaction that would face significant scrutiny from MGM and regulators in Nevada. But even using these metrics, Dubai World has lost 60%-75% of its original investment. You might think this would have taught Dubai, and the rest of the UAE, a lesson about betting on Las Vegas.
Not the last lesson learned on the Las Vegas Strip
Despite Dubai's losses, other members of the UAE's inner circle continue to bet on Las Vegas. Hakkasan Group, funded by Abu Dhabi's Sheikh Mansour bin Zayed Al Nahyan, is taking over the Las Vegas restaurant and nightclub scene. It built the $100 million Hakkasan nightclub in the MGM Grand, bought Enlightened Hospitality Group this year, partnered with MGM to build nongaming resorts, and is rumored to be acquiring Morgans Hotel Group's stake in Light Group.Dubai World's acquisition of MGM shares and half of CityCenter was made at the peak of the real estate boom, and I can't help but wonder if Hakkasan is betting on Las Vegas at the peak of the party scene. At least this time around there aren't billions of dollars at stake, just a couple hundred million. That's a low-stakes gamble compared to Dubai World's bet on Las Vegas
Extraordinary Popular Delusions & the Madness of Crowds -- Charles Mackay LL.D.
-
Caesars places largest operating division into bankruptcy
Caesars Entertainment Corp. placed its largest operating division into bankruptcy Thursday, taking the initial steps to eliminate almost $10 billion of debt and restructure the casino operator’s troubled balance sheet. Wi;; have to comply with gaming board restrictions
The balloon has finally popped !!!
Fortes Fortuna Juvat
Eddessa_Knight
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Egg Harbor twp.south Jersey shore
United States
Member #112,963
June 29, 2011
4,160 Posts
OfflineAtlantic city race course simulcast will close today, the final nail in the coffin.
Although I did'nt use the simulcast, it's what kept the track alive since they were required to run a live 6 day meet in the springtime
as a qualification for the simulcast licence.
I will miss That springtime meet 8 miles from home as now the closest track to me is 70 some miles away.
Take your pick, Monmouth park 70 miles north, Philly park 70 miles NW, Delaware park 70 miles West.
If I go to Delaware the one advantage is I can buy lottery in an anonymous state.
Extraordinary Popular Delusions & the Madness of Crowds -- Charles Mackay LL.D.
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Atlantic city race course simulcast will close today, the final nail in the coffin.
Although I did'nt use the simulcast, it's what kept the track alive since they were required to run a live 6 day meet in the springtime
as a qualification for the simulcast licence.
I will miss That springtime meet 8 miles from home as now the closest track to me is 70 some miles away.
Take your pick, Monmouth park 70 miles north, Philly park 70 miles NW, Delaware park 70 miles West.
If I go to Delaware the one advantage is I can buy lottery in an anonymous state.
haymaker, thank you for the latest sad update on Atlantic City closing simulcast
Do you think they will close the BEACH for a grand finale?
Good Luck @ Delaware, etc
Fortes Fortuna Juvat
Eddessa_Knight
