Gary Loveman has stepped down as the CEO of Caesars Entertainment. Mark Frissora, the onetime CEO of Hertz Rental Cars, is set to succeed Loveman as the new CEO of Caesars Entertainment. Frissora will join Caesars's board of directors immediately. On July 1, he will become the Chief Executive Officer.
For the time being, Gary Loveman will stay on as the Chairman of the Board for Caesars. In 2003, Loveman replaced Phil Satre as CEO, though the company was called Harrah's Entertainment at the time (its name was changed in 2010). In his 12 years of stewardship, Gary Loveman built Caesars Entertainmet into the largest gaming company in the world.
Gary Loveman's Tenure at Caesars
The years from 2003 to 2015 also will be seen as troubling ones for Caesars, though. The company was purchased by hedge funds Apollo Global Management and TPG Finance in 2006. The hedge funds used a leveraged buyout to take the company private, but that left Caesars with an additional $20 billion in debt. Eventually, debt grew to nearly $30 billion. A Global Recession just after the buyout, putting a huge debt burdon the company when credit dried up.
Though Gary Loveman saw the debt paid down to $23 billion, it was still too much of a burden for the company. Over $2 billion per year of the company's revenue was paid on interest alone. For a company which generates $8 billion to $9 billion in revenues each year, that was unsustainable. The company has lost money every year since 2009.
CEOC Bankruptcy Filing
In December 2014, Caesars Entertainment Operating Company (CEOC) filed for bankruptcy. While Apollo and TPG got 80% of the first lienholders to agree to the restructuring plan, the junior creditors did not like their compensation and filed a lawsuit in January 2015. Most gaming and financial analysts predict that lawsuit will continue for years.
Gary Loveman's resignation statement discussed the accomplishments, before acknowledging the troubles. Loveman said, "Caesars has accomplished more than what we could have imagined when I arrived."
With the company "in the midst of a formal restructuring of one of its subsidiaries," the departing CEO said, "the time is ripe for a transition."
Loveman's Legacy
Those who want to criticize Gary Loveman should remember he could not control the actions of Apollo Global and TPG Finance. Those hedge funds bought out Harrah's Entertainment, but left Loveman saddled with tremendous debt
Gary Loveman suggested he wanted to make the hard decisions, before turning the company over to his successor. He added, "My decision to begin to transition management now comes with the confidence that we have taken the steps necessary to ensure the company's long-term success."
Mark Frissora Profile
Mark Frissora has experience with heavily-indebted companies. When he took over Hertz in 2006, the rental car giant had assumed billions in debts after a private takeover--much like Caesars. From that base, Frissora helped drive a global expansion for the car rental enterprise. When Frissora left Hertz, he cited personal reasons for his departure. Bloomberg reported a much different reality, though. Citing accounting and operational mistakes, Bloomburg said that investors had called for Mark Frissora's removal as Hertz CEO.
Mark Frissora walks into a first-class financial catastrophe in his new job with Caesars Entertainment. Like coaches in the major sports leagues, though, CEOs tend to take over a corporation during times of stress or trouble. Usually, if everything is going well, a board of directors wants the CEO to continue with their leadership. While some chief executives move on to something bigger and better in a time of positive growth, executives like Mark Frissora specialize in financial damage control. While the ex-Hertz CEO may have made his share of mistakes in his previous corporate roles, he is also imminently qualified to handle the Caesars Entertainment mess.
Bonderman and Rowan Speak
David Bonderman, a co-founder of TPG, and Marc Rowan, a co-founder of Apollo, seem to have no qualms about turning Caesars Entertainment over to Mark Frissora, though.
Rowan and Bonderman issued a joint statement saying, "Mark has a long history of driving growth, optimizing operations and creating shareholder value. We are confident that his efforts combined with the restructuring...will help create long-term shareholder value at Caesars."
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