Caesars Prospects After Bankruptcy

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Monday, October 23rd, 2017 | Written by Charles Washington

Caesars Entertainment Corp filed for bankruptcy in January of 2015, but with the company having shed $10 billion from its debt and having recently emerged from its three years spent in the doldrums, its casino unit has said that it was now looking forward to expanding its famous Caesar’s, Horsehoe, and Harrah’s brands both home and abroad.

While Caesars has high hopes of gaining on its nearest casino rivals, industry analysts believe that it may be too late for them to catch competitors such as MGM Resorts International and Las Vegas Sands, who have busily been investing in the booming Asian casino markets over the past few years in order to counteract the effects of cooling growth back home.

$25 Billion in Debt

About 25 years ago, Caesars Entertainment Corp was the casino industry’s biggest name until going under with debts of $25 billion in 2008. This month, Caesars subsequently exited Chapter 11 bankruptcy with a streamlined, simplified structure that has seen it merge with Caesars Acquisition Corp, as well as other affiliates, with their former creditors now holding most of the company’s stock.

As a result, Caesars CEO Mark Frissora has said that the operator was “primed for growth,” explaining that “with reduced leverage, increased free cash flow and the new REIT structure, we are positioned with a solid foundation to pursue a diversified growth strategy.”

Consequently, the company has hired two new executives in order to oversee its new expansion project. Amongst the main international markets being targeted by Caesars are Japan, and Brazil, which recently have expressed their intentions to grant resort and gaming licenses pending the required legislation being put in place.

International Markets

While Caesars Entertainment Corp has signaled its intention to expand its operation internationally, it currently finds itself at a severe disadvantage compared to rival companies, such as Las Vegas Sands and MGM Resorts, who have already established themselves in the high-growth markets of Singapore and Macau. Moreover, they accomplished all this while Caesars spent years struggling with the weight of its debt mostly stemming from the company’s 2008 buyout by Apollo Global Management and TPG Capital.

Home Market Advantages

Back home in the US, however, Caesars may enjoy a more competitive edge over its rivals due of its enormously popular Total Rewards loyalty program, which with more than 50 million members is the the biggest in the whole casino industry. These type of reward programs are seen as vital for incentivizing casino customers to visit their favorite venues each week, and try out their luck playing table games or the slots. As one couple, the Johnson, said of the Caesars’ Horseshoe Hammond near Chicago:

“The more we spend, the more points we get for food and other perks.”

Furthermore, the replacement of pure gambling in favor of other products and services, such as hotel accommodation, dining and entertainment, mean Caesar customer will also be more uniquely placed to take advantage of the company’s attractive loyalty scheme.

In addition, Las Vegas has experienced somewhat of a revival recently, and over the past three years Caesars has seen its operating profit increase by 50%. As a result, the company has now emerged out of Chapter 11 bankruptcy with a value of around $25 billion, a sum similar to what it was worth when it was originally sold in 2008. Back then, however, the economy was blighted by the financial crisis, and a rapidly shrinking tourism and conventions market, with these sectors having seen an impressive turnaround since then.

Positive Signs

Therefore, while the fate of Caesars Entertainment Corp may still be uncertain, there are a number of signs pointing towards the operator reclaiming their success in the coming years. That said, it will be difficult for Caesar to mount a serious challenge to its rivals without first making some major inroads into the lucrative and growing Asian market.