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McClatchy-Tribune  07/06/2014 9:06 AM ET
Caesars, already swimming in debt, headed toward the deep end [Las Vegas Sun :: ]

July 06--When drowning in debt, most people know they shouldn't splurge on a new mansion, buy a high-end sports car or drool over a 150-foot yacht.

Caesars Entertainment Corp. didn't learn that lesson.

The Las Vegas casino giant, weighed down by almost $24 billion in IOUs stemming from a 2008 buyout, is pushing ahead with major projects in the United States and Asia, despite soured finances and bondholders' default claims.

The company plans to open the $442 million Horseshoe Casino Baltimore next month with partner Rock Gaming. In New York, executives submitted plans for an $880 million, 115-acre resort about 50 miles north of New York City. CEO Gary Loveman said Caesars wants to raise -- and will have no trouble doing it ­-- at least $5 billion to build a resort in Japan, where casino owners are salivating over the potential of legalized casino gaming. And in March, South Korea gave Caesars and its partners the green light to build a resort that reportedly will cost up to $2.2 billion.

In Las Vegas, Caesars employs 24,000. It dominates much of the Strip but lost almost $3 billion last year, is on the hook for more than $5 billion in debt payments by the end of 2015 and is trying to nurse itself back to health with, among other things, clever accounting, including the $2.2 billion sale of four casinos to, basically, itself.

Moreover, bondholders claiming to hold more than $1 billion in company debt issued a notice of default in early June. They claimed Caesars breached loan terms when it unloaded four resorts to Caesars Growth Partners, an affiliate that's majority owned by Caesars and part-owned by a company spin-off.

With all its financial woes, how will Caesars pay for a growing pipeline of resorts? And why is it looking to spend billions on new casinos when it's billions in the hole with existing ones?

Spokesman Gary Thompson said Caesars teams with investors on projects and mortgages properties so that in case of default, lenders seize just the resort.

The company also has roughly $2.5 billion in cash on its books, and despite its mountain of debt, lenders still extend it credit, albeit for a steep price. Caesars pays up to 10 percent interest on some bonds, Thompson said.

Still, borrowing more money won't dig Caesars out of its hole, and the company is trying to stave off debt payments.

As Thompson noted, Caesars has pursued dozens of bond swaps, amend-and-extends and other fixes in recent years. The ultimate goal is to pay off the bonds -- or, as Thompson said, to "buy additional time."


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