Fitch Rates Caesars' Proposed $1.5B Sr. Secured Notes 'CCC+/RR3'

  Fitch Rates Caesars' Proposed $1.5B Sr. Secured Notes 'CCC+/RR3'

Business Wire

NEW YORK -- February 4, 2013

Fitch Ratings assigns a 'CCC+/RR3' rating to Caesars Entertainment Operating
Company, Inc.'s (OpCo; CEOC) $1.5 billion proposed add-on issuance to the 9%
senior secured first-lien notes due 2020. The Rating Outlook is Negative. A
full list of ratings follows at the end of this release.

In connection with the offering, CEOC is seeking several amendments to its
senior credit facilities, which includes permitting the use of proceeds from
today's notes issuance, obtaining an additional $100 million of revolving
facility commitments due January 28, 2017, increasing accordion capacity by
$650 million, and revising the calculation of its primary financial
maintenance of 4.75x senior secured net debt/EBITDA.

If CEOC obtains the amendments, the proceeds from the add-on issuance will be
used to repay outstanding term loans (TLs) and transaction expenses. The TL
repayment to consenting lenders will be applied first to outstanding B1, B2
and B3 TLs due 2015, then up to 20% of principal outstanding of B5 and B6 TLs
due 2018, with the balance of any additional proceeds to reduce outstanding
TLs at CEOC's discretion.

The proposed transactions are a slight positive by pushing out 2015 and 2018
maturities to 2020 and by improving liquidity through the additional revolving
commitments.

However, that is offset by the higher interest costs, which will negatively
impact OpCo's near-term cash burn rate. The company's recent refinancing
transactions, including the proposed issuance today, have deteriorated the
company's free cash flow profile. Fitch estimates that the OpCo will burn $450
- $600 million annually in 2013 - 2014.

The B1, B2 and B3 TLs bear interest at roughly 3.2%, while the B5 and B6 bear
interest at nearly 4.5% and 5.5%, respectively. As a result, interest costs
from the proposed transactions would increase by roughly $70 million.

Proforma for recent financings and adjusted for cage cash, CEOC has more than
$2 billion of excess cash. The cash on hand should be adequate to fund the
CEOC's cash burn projected by Fitch through 2015, make near-term investments
in unrestricted subsidiaries (Baltimore and Project Linq), and paydown $125
million in unsecured notes coming due 2013.

SENSITIVITY/RATING DRIVERS

With Caesars pushing out a bulk of its 2015 maturities, Fitch is now more
focused on the company's cash burn rate. Transactions that increase CEOC's
cash burn rate materially could lead to a downgrade.

As Fitch previously indicated, we are also monitoring developments that may
sway the parent's ability or motivation to support CEOC, since the viability
of CEOC may depend on such support. The pursuit of a strategic transaction
related to a newly created entity, Caesars Growth Venture Partners (CGVP), may
pressure ratings as it may reduce the company's willingness to support OpCo
debt obligations.

Fitch may revise the Rating Outlook back to Stable while affirming the IDR at
'CCC' if the operating trends pick up stronger than expected, improving
prospects for a sustainable FCF profile by a 2015 time frame. The Las Vegas
Strip (27% of OpCo's LTM EBITDA) is Caesars' best bet for leveraging any
improvement in the macroeconomic environment.

RECOVERY RATINGS

Today's proposed issuance is not material to the RR3 rating from a recovery
analysis standpoint.

In December 2012, Fitch downgraded CEOC's first-lien debt to 'CCC+/RR3' from
'B-/RR2' when it last issued $750 million of first-lien notes due to reduced
recovery prospects from that issuance, and the longer-term trend of executing
several transactions that have negatively impacted first-lien recovery
prospects.

The 'CCC+/RR3' rating assigned to the proposed notes reflects estimated
recovery rate for first-lien debt in the 51%-70% range. Fitch's estimated
recovery for CEOC's first lien debt is at the high end of the stated range, so
there is considerable cushion at the 'RR3' Recovery Rating for the first-lien
debt.

Detailed recovery analysis using data through June 30, 2012 for Caesars is
available on www.fitchratings.com (see links below).

Fitch's rating commentary and a detailed report on Caesars, both dated Sept.
5, 2012 provide a more extensive discussion about the Caesars overall credit
profile.

Fitch ratings are as follows:

Caesars Entertainment Corp.

--Long-term IDR 'CCC'; Outlook Negative.

Caesars Entertainment Operating Co.

--Long-term IDR 'CCC'; Outlook Negative;

--Senior secured first-lien revolving credit facility and term loans
'CCC+/RR3';

--Senior secured first-lien notes 'CCC+/RR3';

--Senior secured second-lien notes 'CC/RR6';

--Senior unsecured notes with subsidiary guarantees 'CC/RR6';

--Senior unsecured notes without subsidiary guarantees at 'C/RR6'.

Chester Downs and Marina LLC (and Chester Downs Finance Corp as co-issuer)

--Long-term IDR 'B-'; Outlook Negative;

--Senior secured notes 'BB-/RR1'.

Caesars Linq, LLC & Caesars Octavius, LLC

--Long-term IDR 'CCC'; Outlook Negative;

--Senior secured credit facility 'CCC+/RR3';

Corner Investment PropCo, LLC

--Long-term IDR 'CCC'; Outlook Stable;

--Senior secured credit facility 'B-/RR2'.

Additional information is available at 'www.fitchratings.com'. The ratings
above were unsolicited and have been provided by Fitch as a service to
investors.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Parent and Subsidiary Rating Linkage' (Aug. 8, 2012);

--'Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers'
(Nov. 13, 2012);

--'Distressed Debt Exchange' (Aug. 8, 2012);

--'2013 Outlook: U.S. Gaming - Return Generation in Full Swing' (Dec. 17,
2012);

--'U.S. Gaming Recovery Models -- Third-Quarter 2012' (Dec. 20, 2012);

-- 'Fitch Rates Caesars' Proposed $300MM Sr. Secured Notes 'CCC+/RR3';
Downgrades 1st Lien Debt' (Dec. 5, 2012);

--'U.S. Leveraged Finance Spotlight Series: Caesars Entertainment Corp.'
(Sept. 5, 2012);

--'Fitch Affirms Caesars' OpCo at 'CCC' & Chester at 'B-'; Revises Outlook to
Negative' (Sept. 5, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685552

Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=693773

Distressed Debt Exchange

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685903

2013 Outlook: U.S. Gaming (Return Generation in Full Swing)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696684

U.S. Gaming Recovery Models - Third-Quarter 2012

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=697752

U.S. Leveraged Finance Spotlight Series: Caesars Entertainment Corp.

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=683491

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Contact:

Fitch Ratings
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or
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