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Las Vegas Casino Death Watch

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Last updated: April 8, 2014

Recent News


From the Pretty Much Beating a Dead Horse Department, Standard & Poors has lowered it's credit rating for Caesars Entertainment from CCC+ to CCC-, which isn't just a "junk" rating, but pretty close to the "I can't find a sanitation crew willing to take this thing off my curb" territory. The article also indicates that S&P believes that some sort of reorganization has become more likely, although they don't seem to indicate how likely. Worse, they call Caesars' capital structure "unsustainable". Without an additional infusion of cash or sell-off of assets, they may not make it to the end of 2015 without having to file for bankruptcy.


Jackie Gaughan has passed away. I can't call it a tragedy when a man who was working well into his 80s dies at 93, but it's still a sad day. Mr. Gaughan as much as anyone shaped the evolution of Las Vegas, especially downtown. As much a gambling pioneer as he was, what impressed me most about him was his decency. It may be a cliche to say that we're unlikely to see someone like Mr. Gaughan again, but it's true. He left an indelible and positive mark on this town, and his influence will be missed.


We have more on the recent financial moves by Caesars. This is an examination of the moves that Caesars made last week. The analysts quoted in the article and much of Stutz' commentary on the subject echos ours. Bottom line: Besides raising some capital to keep the operation running, another plausible reason for making the move is to keep some key assets, such as Caesars Interactive, separate in case the bulk of the company has to file for bankruptcy some day.


From the Way Inside Baseball Department, Caesars is selling some of its casinos to another company with Caesars in its name. To wit, Bally's Las Vegas, the Quad, Harrah's New Orleans, and the not-yet-reopened casino now named the Cromwell will be sold for $2.2 billion to Caesars Growth Partners. It seems that Caesars owners Apollo and TPG own the majority of Caesars Growth Partners, but not all of it, so this deal allows them to raise some desperately needed cash.

As a consequence of this, debt rating organization Moody's has announced it's looking carefully at the big Caesars and is considering downgrading its ratings depending on whether it spends the money raised by these shenanigans wisely or not.

We'd explain all the implications of this move to you, except that it's all very complicated involving tax laws, and carried interest, and depreciation and all that, which is to say, we don't really understand it all either. But, if it seems to you to be reminiscent of someone rearranging deck chairs, let's just say you're not alone. Again, we don't think that an implosion of Caesars is imminent, but it has been a long time since we've been optimistic about the long term financial health of Caesars as a company.


We have a projected opening date for the SLS, Labor Day weekend, 2014. Not being night club types, we're not really the target demo for the property, but some of the restaurants look intriguing. In any case, we wish them luck and applaud what we hope is the beginning of a revitalization of the north Strip.


From the "Here We Go Again" department, a judge has issued an order requiring a delay in demolition of the Harmon tower. It would also not surprise us in the least if some other judge issues an order contravening this one. It certainly wouldn't surprise us if the legal system keeps batting this thing back and forth like a slightly bored cat for the rest of the year. If we watch this saga long enough, something might actually happen!


We have a new name for Bill's Gamblin' Hall or Gansevoort Las Vegas or whatever you want to call the former Barbary Coast. Are you ready for "The Cromwell"? Howard Stutz' article at the RJ says they'll start accepting reservations on February 24, although they haven't announced an opening day. We thought the idea when Caesars dumped Gansevoort as a partner was to find another partner? We don't see any sign of one. We're curious as to why? Did no one want to parter with Caesars on this?


First, Happy New Year to the Death Watch readership. Second, despite may reader concerns, we haven't gone anywhere. The reason there haven't been any posts for a while is that there hasn't been any relevant news for a while. We don't make the news here, we can only report on it when it happens. Third, they're starting to clear out some refuse from inside the Harmon Hotel in preparation for its demolition. Honestly, we had expected they were at least this far along, and we sorta thought the next news we heard on the building was that they had started the actual deconstruction. However, this story indicates that it will probably be months yet before that occurs. Still, our prediction is that this process will begin some time this year.


The Westin Casuarina casino has changed its name to Max Casino. If your response to this is, "Huh?" don't worry about it. Also, they're updating their sports book. What, are they adding a chair?


Word is that the Downtown Grand, the former Lady Luck, will open on October 27 with the official Grand Opening on November 12. Allegedly, the renovation costs for the casino and development costs for the surrounding neighborhood runs more than $200 million. Given that the Golden Nugget's entire sales price in 2005, near the top of the casino market, was $295 million, and that any other downtown casino could probably be had for less than $40 million, this is a big bet in a market that hasn't proven it can support this property. Nonetheless, we're interested in taking a look at this place and we wish them luck in their venture.


Caesars is dropping Gansevoort, their partner in redeveloping Bill's Gamblin' Hall on the Strip. So, who will be the new partner? How much money have they sunk in this deal? How does this affect what they're going to build? How does this affect the schedule? How long will it take to find a new partner? More bad news for Caesars who doesn't need any.


There is more bad news on the Caesars front. Investment web site the Motley Fool has written an analysis of the Caesars situation. Summary: They don't think it looks good for Caesars going forward. Here are their facts: Caesars is assuming an additional $2.15 billion in debt on top of a total of $28 billion on gross revenues of $8.6 billion which is down 15% from last year. They've posted negative free cash flow for each of the past five years. Even if one removes capital expenditures from this, then their free cash flow is positive, but the highest number they've produced in the last five years is $535 million. Interest costs for Caesars runs about $2.1 billion per year. We're not in the business of giving investment advice, but given this information, it's hard for us to see a way out.


Howard Stutz of the RJ gives us more information about Caesars' financial situation. Basically, they've got $23.5 billion in debt. They're refinancing about $5 billion that comes due next year, as mentioned in our previous posting. Now they're spinning off a new company to hold Planet Hollywood and the new Horseshoe Casino Baltimore as a separate entity. They'll raise some money from this but not a lot as a percentage of their debt. At the same time, they don't specifically say that they'll use this money to pay down their debt.

What's also not clear to us is why should specifically these properties be split off? We might guess, and this is all just wild speculation, that Planet Hollywood would be a low performance property with a significant amount of debt attached to it, so spinning that off might be a way to send some non-core holdings into Chapter 11 separate from the rest of the company, but if this is the strategy and, again, we have no strong reason to think it is, why link that with a brand new property, unless they now expect it to underperform? The S-1 Caesars filed with the SEC doesn't tell us much about their strategy. So, we don't know what their plan is, but we find a statement Stutz quotes in his article from a representative of the company to be telling: "Caesars has a lot of debt. We think it's manageable, but others disagree." Not exactly confidence inspiring.


More on the issue of Caesars and financing. The RJ reports that Caesars has restructured more than $4 billion in debt that was scheduled to come due this year. On the one hand, this will help Caesars navigate through the current lean years. However, at some point we have to start to wonder whether continually pushing off this debt isn't the corporate equivalent of paying off one credit card with the other. What happens if the future economic world in which it becomes easy to pay off this mounting debt doesn't happen?


Rich Velotta of Vegas, Inc. notifies us that the publisher of the "Openings and Closing in Las Vegas" newsletter has warned its subscribers that Caesars may be on the verge of bankruptcy. This seems possible, based on what little we know, as it appears to us that during the economic downturn Caesars deferred a lot of its debt, but it still has to come due some day, it's not like the economy has gotten a whole lot better in the last few years, and Caesars, unlike Las Vegas Sands or MGM can't pay off their Las Vegas debts with income generated by properties in Macao or Singapore. On the other hand, no offense to the maintainer of the newsletter, but it's not like we read this in Business Week, so we're more than a little skeptical. But, if it's reputable enough for Velotta to report, that makes it reputable for us to pass on... . On the off chance Caesars' resorts does declare bankruptcy, we don't believe that significantly affects already open casinos or players' deposits with those casinos.


The Downtown Grand seems like it's still headed toward opening this fall, although we haven't heard a specific date. Of course, this place is the reincarnated Lady Luck, which closed back in 2006. The owners claim to be investing more than $100 million on the project. That's a lot of money for a downtown casino that's not the Golden Nugget. It's always nice to see a new place open up, and we wish the new owners luck.


Okay, this won't be the last word on this topic, but a judge has cleared the way for the demolition of CityCenter's Harmon tower. What's different this time, is that both sides in the dispute (MGM Resorts and Perini Construction) agree that the building is unsafe. This doesn't mean that there can't be challenges to the idea of demolition, and it doesn't mean dismantling the building will start tomorrow. Howard Schwartz tweets that MGM says it might take up to a year to clear the site, and it hasn't started yet. We at the Death Watch don't expect a spectacular implosion, its proximity the the street, crosswalks, and other buildings precludes that.


The Las Vegas Review Journal reports that the CEO of the Riviera, Andy Choy, was fired. This is another issue is that over the last several months they've closed several restaurants while changing around a few others without doing an extensive remodel as far as we can see. Third, their annual report (the 10-K, as they say in the financial world) isn't exactly brimming with confidence. While we expect a certain number of "going concern" warnings in any such document, especially one for an organization that came out of bankruptcy just over two years ago and business hasn't exactly been booming, this one feels especially ominous. This has to be the most "at risk" property on the Strip at the present time.


Chris Sieroty has a piece in the RJ about Hooters. We learn some things. First, because the debt holder bought the casino out of bankruptcy, the property currently has no debt. Second, the current owners of the property are actively seeking a new owner for it. Third, while they don't have a new name for the place, they're actively shopping for a new hotel operator, and this could happen "shortly". So, there's little chance for the place to close, but a new owner and new theme are very possible on a time horizon of months.


Terrible's casino is changing its name to "The Silver Sevens". A name change makes sense, as it's no longer associated with the Herbst family, but the new name doesn't really ... grab us. Ah, well.


The Gold Spike will reopen in about two weeks! Only it will reopen without its casino. We're not sure this is a big loss to the Las Vegas community, as the casino consisted of a maximum of four table games, a few dozen slots and video poker machines, and a William Hill sports betting counter, but it means it no longer falls under the auspices of the Death Watch. This is good news to the couple of dozen employees who will be able to get back to work.


The Gold Spike may be closed, but the lawsuits have just begun. An employee has filed suit claiming that the Gold Spike's owner didn't give the required 60 day notice for closing the property. We can't find a news source who has actually looked into what's going on.

If they won't pick up the ball, the Death Watch will. Note, we're not labor lawyers and nothing we say here should be taken as a pronouncement by someone with, you know, expertise. However, it looks to us that the relevant regulation here is a federal law known as the WARN act. It says that a company with more than 100 people must provide 60 days notice before closing a facility if the shutdown will result in the loss of 50 or more full-time positions. The Las Vegas Sun suggests that less than 50 people lost their jobs, which would mean that the Gold Spike wouldn't have to provide notice.

Of course, there may be a state law, gaming regulation, or labor agreement that is in force that has different requirements. We hope someone with real knowledge will chime in, or failing that, a news source with actual resources *cough* will ask someone who knows what's going on here.


The Las Vegas Club is closing its hotel towers. Previously, they had only been open for weekend reservations, now they won't be open at all. We suppose this could be a prelude to a big upgrade as Tamares did with the Plaza, but they were trumpeting that upgrade to high heaven, this one, not so much. Our best guess would be that they're going Binion's, keeping the casino open but closing the rooms. What their long term plan is, we don't know.


Emergency Closing!
The Gold Spike is closing this Sunday! Given that the buyer has historically not been involved in gaming, this very well may be the end of that property as a casino. If you want to get a last look at the place, start heading that way now.


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