Caesars Entertainment, the casino chain carrying more than $22bn in debt, completed an initial public offering that gives the company a market value of $1.13bn, Bloomberg reports. Las Vegas-based Caesars, taken private in a $30.7bn buyout by Apollo Global Management and TPG Capital in 2008, raised $16.3m selling 1.81m shares at $9 each, the company said in a statement. The stock, which was offered for $8 to $10 apiece, will start trading on the Nasdaq Stock Market on Wednesday under the symbol CZR. The $16.3m raised is a fraction of what it was hoping to muster two years ago. Reuters says the deal is often referred to as an example of how the credit bubble that preceded the financial crisis of 2008 led to overleveraged deals that have left their private equity investors with a Herculean challenge of getting their money back. Caesars’ earnings before interest, tax, depreciation and amortization (EBITDA) were $1.8bn in the 12 months ending September 30 on interest expenses of $1.93bn, according to its IPO document.
Deutsche Bank’s credit exposure to Las Vegas casino operations has reached $4.9bn, not far off its $5.1bn exposure to peripheral sovereign debt in the eurozone, according to the FT. Deutsche maintains a $3.9bn credit facility with the Cosmopolitan casino, which the bank completed after the original developer defaulted on its loans. The banks also holds $1bn of debt and 25 per cent of the equity of Station Casinos. Las Vegas has been described as the “ground zero” of the ongoing collapse in US housing and construction, leading to severe strain on indebted casino developers.
To those who say the stock market is nothing more than a casino we present the following:
French retailer Casino Guichard was an early mover in the credit derivatives markets on Monday amid a flurry of merger speculation and stakebuilding talk.
The cost of insuring Casino’s debt initially rose 6bp to 44bp before settling at 40bp as traders said Belgian billionaire Albert Frere was considering taking a €2bn stake. A separate rumour of a merger with parent company Rallye under a new holding company was also doing the rounds. Read more