Caesars Tumbles With Sale of Stock, Outlines New Debt Terms

Caesars Entertainment Corp., the casino company with more than $23 billion in debt, is selling at least 10 million new shares and adjusting a $4.8 billion bond and loan offer. The shares fell for a second day.

Proceeds of the stock sale could total $260.2 million, excluding fees, based on Caesars’ Sept. 24 closing price, if Credit Suisse, the investment bank running the sale, exercises an option to buy 1.5 million additional shares, the Las Vegas-based resort operator said today in a filing.

Coping with a sluggish recovery in domestic gambling markets, the largest U.S. casino owner is restructuring debts that originated in a $30 billion buyout in 2008 led by Apollo Global Management LLC and TPG Capital. Caesars is also selling a piece of its new online gambling business in a deal that may raise $1.18 billion.

“It’s consistent with them trying to increase their cash balances to further their ability to keep from running out of cash in 2015,” Alex Bumazhny an analyst at Fitch Ratings, said in an interview. “This doesn’t really move the needle much. They still remain very overleveraged and still free-cash-flow negative.”

Caesars fell 5.2 percent to $19.84 at the close in New York after retreating 7.6 percent yesterday. The stock has almost tripled this year.

Proceeds of the stock sale will be used for general corporate purposes, including development projects, retirement of debt and capital expenditures, Caesars said in the filing. The company had 126.3 million shares outstanding on Aug. 1, according to the latest quarterly report.

Debt Terms

Caesars today also said it’s adjusting the terms of a debt sale, increasing the amount of bonds to refinance debt, while cutting the size of a loan offering, according to a person with knowledge of the matter.

An offering of first-lien debentures was increased to $1 billion to $1.5 billion from $500 million, while the company reduced the loans it’s seeking to $2 billion to $2.5 billion from $3 billion, said the person, who asked not to be identified because the terms aren’t set. The company also trimmed a second-lien notes offering to $1.25 billion from $1.35 billion.

Caesars will use proceeds from the debt offering to refinance commercial mortgage-backed securities and a $450 million senior-secured facility, according to a Sept. 18 regulatory filing.

Bond Prices

The company’s $3.3 billion 10 percent notes maturing in December 2018 declined 1 cent to 53.75 cents on the dollar, to yield 27 percent at 3:41 p.m., according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Caesars may have had multiple reasons for the stock sale, John Kempf, an analyst with RBC Capital Markets in New York, said in a research note.

The company may want to increase the supply of shares available for short-sellers who need to purchase stock to cover their positions or for investors looking to participate in an pending rights offering, wrote Kempf, who rates the stock underperform, the equivalent of a sell recommendation.

Along with the debt refinancing, Caesars is looking to raise as much as $1.18 billion by offering investors the right to buy shares in Caesars Acquisition Co., a new entity that will own stock in its online gaming business as well as two casinos in Las Vegas and Baltimore.

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