Caesars Could Sell Indiana Casino Real Estate This Year

Posted on: January 9, 2024, 11:07h. 

Last updated on: January 9, 2024, 11:27h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Reducing one of the gaming industry’s largest debt burdens remains a top priority for Caesars Entertainment (NASDAQ: CZR), and that objective could be assisted by divesting the real estate of a pair of Indiana casinos.

Hoosier Park in Indiana
Hoosier Park in Indiana is one of two Indiana gaming venues where Caesars could sell the property assets this year to raise cash and reduce debt. (Image: The Herald Bulletin)

In a new report to clients, Bank of America analyst Shaun Kelley said 2024 could be the year that Caesars sells Centaur Holdings. That is the holding company of Harrah’s Hoosier Park and Horseshoe Indianapolis, formerly known as Indiana Grand.

We expect this sale to raise nearly $2 billion in net proceeds that should reduce traditional and lease-adjusted leverage below five times and close to their targeted range,” wrote Kelley.

VICI Properties (NYSE: VICI), the largest casino real estate investment trust (REIT), would be the likely buyer of those properties. When Eldorado Resorts announced its $17.3 billion takeover offer for the “old Caesars” in June 2019, it struck an agreement with VICI whereby the gaming company could sell or the REIT could acquire those assets between Jan. 1, 2022, and Dec. 31, 2024.

Indiana Casino Sales Could Be Meaningful to Caesars

As of the end of the third quarter, Caesars carried $12.29 billion in outstanding liabilities. While that’s off the highs seen immediately after Eldorado completed its acquisition of the company in June 2020, analysts and investors want the Harrah’s operator to continue pruning debt.

Given management’s progress on that front and a portfolio of assets that can effectively generate cash, Caesars is widely viewed as one of the more compelling deleveraging stories in the industry. The company has also been a hotbed of asset sale rumors, though it hasn’t engaged in such transactions over the past two years.

Harrah’s Hoosier Park and Horseshoe Indianapolis, which are two of the operator’s four Indiana casinos, joined the old Caesars by way of that company’s November 2017 $1.7 billion purchase of Centaur Holdings. The company’s other Indiana properties are Horseshoe Hammond and Caesars Southern Indiana.

“Horseshoe Hammond serves the Chicagoland area and Horseshoe Southern Indiana serves the Southern Indiana and Louisville area,” according to Caesars.

Caesars Leverage Risks Starting to Wane

When interest rates are elevated, as is the case today, shares of highly leveraged companies often fall out of favor with investors. In the case of Caesars, the company is at least making progress on this front, and its management team has an established record of cutting costs and debt. Potentially adding to the upbeat outlook is that some of the operator’s largest capital commitments are in the rearview mirror.

Coupled with accelerating free cash flow as identified project capital plans (New Orleans and Danville) come to an end, Caesars could be worth watching as leverage risks fade,” added Bank of America’s Kelley.

Plus, with VICI, Caesars has a partner with which it has a long-standing relationship, one that’s not afraid to make deals, and one that could be looking to add to its non-Las Vegas portfolio of casino real estate. Caesars is one of VICI’s largest tenants.