Caesars Entertainment Corp. (CZR), the largest operator of U.S. casinos, said a Japan resort would require at least a $5 billion investment and that it would have no problem financing such a project.
“You can typically finance a very substantial portion of that value through the debt market,” said Chief Executive Officer Gary Loveman. Caesars “will have no trouble raising the finance for a world-class facility in Tokyo.”
Caesars, Las Vegas Sands Corp. (LVS) and MGM Resorts International are among the global gambling operators pledging to spend billions of dollars to build resorts in what’s projected to become Asia’s largest casino market after Macau. Such projects are financed based on the cash flow they generate, meaning operators including Caesars expect little difficulty in raising funds, Loveman said in an interview in Tokyo yesterday.
Caesars debt stood at more than $23 billion as of March 31. The company, rated nine levels below investment grade by Standard & Poor’s, has sold assets, transferred properties between units, refinanced some debt and sold equity to stay solvent.
The financing market for casinos is strong, Loveman said. “I financed dozens and the markets for casino finance are very strong,” he said.
After a decade of discussions, Japanese lawmakers this month began debate on a bill to legalize casinos in the world’s third-largest economy. The proposal was submitted last December.
Japanese Prime Minister Shinzo Abe told Bloomberg News this week that his party will seek to pass a law ending a ban on casinos this autumn as part of a plan to boost tourism along with the Tokyo Olympics in 2020.
Completing casinos by 2020 “is getting tough,” Loveman said. It will take several years to solicit bids, award licenses and complete construction, after the government passes the bill to legalize casinos, the executive said.
Caesars would also consider selling shares in Japan to the public via a listing, Loveman said. Rivals Wynn Resorts Ltd. and MGM Resorts have also said they intend to sell shares for planned Japan resort ventures to help boost their profiles in the country.
Caesars has had talks with Japanese companies including Fuji Television Network Inc., Kajima Corp. and Mitsui Fudosan Co. on potential casino partnerships, Steven Tight, president for International Development at Caesars, said yesterday in an interview.
“Capital markets generally believe that well-run large integrated resorts can be highly cash generative and financing specific to a Japanese project may be readily available for Caesars, as well as for others,” said Tim Craighead, Bloomberg Industries gaming analyst.
Caesars, Genting Singapore Plc and MGM Resorts are among operators that have discussed potential casino plans with the government of Osaka, Japan’s second-biggest metropolis.
Lotteries and pachinko, a cross between pinball and slot machines that awards prizes that can be exchanged for cash, are legal in Japan, as is betting on horse, boat and bicycle races.
Japan’s casino market could be worth as much as $40 billion a year as early as 2025, according to estimates from CLSA Ltd, a Hong Kong-based brokerage.
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