Caesars Selling $1.5B in Bonds, Gets Access to New $2B Term Loan

Posted on: January 24, 2024, 01:53h. 

Last updated on: January 25, 2024, 12:15h.

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

Caesars Entertainment (NASDAQ: CZR) said Wednesday that it’s selling $1.5 billion worth of corporate debt to qualified institutional buyers in a private placement.

Caesars
Caesars Palace Las Vegas. The company is selling $1.5 billion in corporate bonds to push out maturities. (Image: Getty Images)

Proceeds from the sale of those bonds, which mature in 2032, along with a portion of a newly accessed $2 billion term loan facility, will be used to tender the operator’s outstanding 6.250% senior secured notes maturing in 2025.

The Company intends to apply the net proceeds of the sale of the Notes and the New Term B-1 Loan (x) to (a) tender, redeem, repurchase, defease or satisfy and discharge any and all of the Company’s 6.250% Senior Secured Notes due 2025 and (b) pay fees and expenses in connection with the foregoing transactions, and (y) if there are any remaining proceeds, for general corporate purposes, including, without limitation, to potentially repay certain outstanding indebtedness of the Company or any of its subsidiaries,” according to a statement issued by the Nevada-based casino operator.

There’s $3.39 billion outstanding on the 2025 bonds for which Caesars last week announced a tendering. The press release didn’t mention the interest rate on the freshly marketed debt.

Smart Move By Caesars

Although the company carries a junk credit rating, the new note sale will likely lure corporate bond investors because, owing to that noninvestment grade, Caesars must compensate market participants for the implication of higher risk.

That’s one reason there could be a robust appetite for the new debt offering from the Harrah’s operator. Another could be that although the gaming firm is bringing new debt to market, the sale is consistent with its deleveraging efforts, because it’s pushing maturities out and erasing some high-yield obligations in the process.

It’s a strategy the company has used in the past. Nearly a year ago today, Caesars told investors it increased the size of a senior secured term loan facility to $2.5 billion from $1.75 billion, allowing it to eliminate some debt scheduled to mature this year and in 2025.

Those moves, announced Wednesday, allow the Flamingo operator to reduce interest expenses, which is meaningful because interest costs on outstanding debt tallied $2.3 billion in 2022 for Caesars.

Why it’s Important

The transactions announced Wednesday assist Caesars in improving its maturity profile, reducing interest expenses, and continuing leverage reduction. But there are other reasons why the bond sale is meaningful.

First, it shows gaming companies — even those with large debt burdens like Caesars — have access to capital. That point shouldn’t be diminished at a time when interest rates reside at their highest levels in two decades.

Second, it shows there’s a probable appetite for the commercial paper being issued by Caesars. While the interest rate on the new bonds is likely to reflect their junk grade, Caesars has avenues to service those obligations, and that could foster confidence among professional fixed-income investors.