Caesars could sell Indiana casino real estate this year
Reducing one of the gaming industry's largest debt burdens remains a top priority for Caesars Entertainment Inc. (NASDAQ: CZR ), and divesting its two Indiana casino properties could help achieve that goal.
Caesars could sell Centaur Holdings in 2024, Bank of America analyst Shaun Kelley said in a new client note. This is the holding company for Harrah's Hoosier Park and Horseshoe Indianapolis, formerly known as Indiana Grand.
We expect the sale to generate nearly $2 billion in net proceeds, which should lower conventional and lease-adjusted leverage below 5x and close to the target range," Kelly wrote.
VICI Properties (NYSE: VICI ), the largest casino real estate investment trust (REIT), is a likely buyer of the properties. When Eldorado Resorts announced its $17.3 billion acquisition of Old Caesars in June 2019, it reached an agreement with VICI to give the gaming company until January 1, 2022 to sell the assets Sell to REIT, otherwise REIT can acquire on December 31, 2024.
Indiana casino sales could be important to Caesars
Caesars had $12.29 billion in outstanding debt at the end of the third quarter. While that's below the highs seen immediately after Eldorado completed its acquisition of the company in June 2020, analysts and investors would like to see the Harrah's operator further reduce debt.
Caesars is widely considered to be one of the industry's most compelling deleveraging stories, given the progress management has made on this front and a portfolio of assets that can effectively generate cash. The company has also been a hotbed of asset sale rumors, although it hasn't made any such transactions in the past two years.
Harrah's Hoosier Park and Horseshoe Indianapolis, two of the operator's four Indiana casinos, joined Caesars in November 2017 when it acquired Centaur Holdings for $1.7 billion. The company's other properties in Indiana include Horseshoe Hammond and Caesars Southern Indiana.
“Horseshoe Hammond serves the Chicago area, and Horseshoe Southern Indiana serves the southern Indiana and Louisville areas,” Kaiser said.
Caesar’s leverage risk begins to recede
When interest rates rise, as is the case today, stocks of companies with high debt levels tend to fall out of favor with investors. For its part, Caesars is at least making progress on that front, with its management team having a strong track record of reducing costs and debt. Perhaps a more positive outlook is that some of the operator's largest capital commitments are now in the past.
With firm project capital programs (New Orleans and Danville) maturing and free cash flow accelerating, Caesars may be one to watch as debt risk subsides," Bank of America's Kelly added.
Additionally, Caesars has a partner in VICI with whom the company has a long-standing relationship who is not afraid to make deals and may want to expand its casino portfolio beyond Las Vegas. area. Caesars is one of VICI’s largest tenants.
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Source: www.casino.org
