Caesars Wins Preliminary Approval to Spin Off New Entity
Caesars Entertainment saw its stock take a 13 percent jump yesterday on word that the Nevada Gaming Control Board has issued preliminary approval of the company’s plan to spin off a portion of its business.
Caesars has also filed with the SEC in order to raise funds for the new company. As part of the move, the company will also shuffle some debt over to the new, public entity.
New company to be called Caesars Growth Partners
According to the Washington Post, Planet Hollywood, the online arm of Caesars, known as Caesars Interactive, and a Horseshoe Casino that is being planned for Maryland, will comprise the new company, to be named Caesars Growth Partners.
The company hopes to raise $1.18 billion by offering stock in the new corporation. Caesars Growth Partners will essentially be a division of Caesars, being that Caesars Entertainment will control 70 percent of the new entity’s stock.
Change won’t result in any operational alterations
The process of moving the various properties is largely just paper shuffling, says Entertainment Deputy General Counsel for Caesars, Michael Cohen. He told regulators that very little will be revamped in terms of the day-to-day operations at Caesars’ iconic properties.
“Nothing really changes (in terms of operation). It’s just a new corporate structure,” he said.
According to Caesars, debt issue will be largely unchanged
One of the major issues facing Caesars is the fact that is has $21.1 billion in debt. Though the spinoff, which has been rumored for some time, has been reported to be motivated in part by the company’s desire to relieve that situation, Cohen says that in fact this new venture will do little to relieve that pressure.
According to Cohen, only $500 million worth of debt that belongs to Planet Hollywood Resorts will be taken on by Caesars Growth Partners.
“Compared to our capital structure, that’s not a big change. Caesars has a lot of debt. We think it’s manageable, but others disagree,” Cohen was quoted as saying.
Online gambling could be a boon for Caesars
Caesars Interactive is planning to launch World Series of Poker-themed online poker rooms in Nevada and New Jersey, both of which have cleared the way for regulated online gambling. Arguably the WSOP is the most recognized brand in all of poker, and the company is expecting that segment of the business to be extremely lucrative when the sites go live.
A final decision is expected from the Nevada Gaming Commission on July 25th.
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