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Caesars - Short Or Buy Puts Before Chapter 11 And The "Institutional Dump"
- Caesars is headed to Chapter 11 under the Singer plan or the Caesars plan.
- Approximately 58% of the shares are held by institutions.
- Fundamental measures are horrible and include a negative book value of ~$28 per share and $23B in debt.
- Second lien notes are trading below 20 cents on the dollar and 37% of the float is already short.
- While all Chapter 11 fact patterns are different, if you want to initiate some form of short position in Caesars, do not wait for the Chapter 11 announcement.
- Despite debt woes, Caesars could be a buy.
- Now's the time to buy Caesars.
- Fundamentals in a post bankruptcy strong.
- Leaner, meaner Caesars will thrive.
- Caesars has proposed a plan to turn its largest operating subsidiary ("CEOC") into a real estate investment trust ("REIT").
- The stock shot up 18% after-hours on the news.
- The market appears to place more value on CEOC as a REIT than as an operating company.
- Whether bondholders agree to the new structure remains to be seen.
- Caesars announced widening net losses during its Q3 earnings report.
- Caesars announced pre-arranged bankruptcy for its largest operating subsidiary, potentially shedding $20 billion in debt.
- Short-covering caused the stock to rise 23% and 21% on November 12 and 13, respectively.
- Shorts are getting cooked and with 15 days to cover, it will probably continue for a few more trading days.
- I own straddles on the stock.
- Caesars' Q3 losses increased in comparison to the year ago period.
- The stock surged 23% after management announced a potential bankruptcy filing for its largest operating subsidiary - CEOC.
- If it can also offload CEOC's $20 billion long-term debt, the parent company's value could rise further.
- The stock remains highly speculative.
- Despite its well-publicized problems, Caesars posted a small revenue gain over the past year.
- Caesars is shutting down its money-losing casinos in the South and Atlantic City.
- Caesars TTM revenue is still higher than that of Wynn Resorts.
- Caesars still possesses a great portfolio of Las Vegas resort properties.
- Casino revenues in Las Vegas have increased by 7.2% since 2007.
Caesars Bringing Senior Lenders To Bargaining Table, Stock Soars 13%
- In early October Caesars' second-lien bondholders filed a notice of default.
- Caesars has 60 days to cure the default or be forced to pay off about $3.7 billion in second-lien debt.
- Friday the company started formal negotiations with first-lien bondholders to pare its debt.
- Bankruptcy, which could result in dilution to equity holders, appears imminent.
Have Caesars And Leon Black Been Checkmated By Second-Lien Bondholders?
- Caesars' major shareholder, Leon Black, has been playing a chess game to restructure Caesars' debt, while maintaining control of the company.
- Second-lien bondholders of $3.7B in debt, filed a default notice claiming Caesars pledged collateral to senior creditors without giving them similar claims.
- Caesars has 60 days to take action to avoid such default.
- Next for Caesars could be repayment of $3.7B in debt or a restructuring leading to bankruptcy or substantial equity dilution.
- Caesars remains the short of the year.
Caesars In Restructuring Talks, Debt For Equity Swap Could Be Highly Dilutive
- Caesars and its subsidiary, CEOC, are in formal talks with first-lien bondholders to restructure $6B in debt.
- Caesars has transferred significant assets from CEOC to other subsidiaries, including CERP and Caesars Growth Partners.
- First and/or second-lien bondholders will most likely ask that Caesars unwind these transactions prior to any restructuring.
- Given $24B in debt and an enterprise value of $12 - 15B, a restructuring will most likely result in a debt for equity swap.
- Caesars' equity is worthless and any debt restructuring will be highly dilutive. Caesars is a short.
- At 8x-10x LTM0614 adjusted EBITDA, Caesars stock is worthless.
- As the market factors in Caesars' $24 billion debt burden, the stock's trading value ($12.05) and intrinsic value ($0) should converge.
- At sell-offs of 60%-70% in the shares, the January 15, 2016 puts at a $10 strike price would deliver returns from 90%-130%.
- Casino revenue in Atlantic City has declined over 8% annually since 2006.
- Caesars' recent closing of Showboat Casino is the third casino closing in Atlantic City this year.
- Investors should avoid MGM and Caesars based on exposure to Atlantic City.
- Caesars was acquired in an LBO for $6 billion in cash and $22 billion in debt at the height of the financial crisis.
- Current Long-term debt of $24 billion is 16x LTM EBITDA of $1.6 billion.
- At 8x - 10x LTM EBITDA, Caesars is worth $12 - $15 billion, much less than its $24 billion debt load.
- Caesars' stock is worthless.
- Caesars has reached a deal to reduce its debt by $548 million.
- Caesars' shares have fallen sharply since I outlined my bearish view.
- I remain bearish on Caesars and believe the company is likely to issue additional equity in the future.
Mounting Losses And Unsustainable $24B Debt Load Make Caesars A Strong SellShock Exchange • Tue, Aug. 12
- Caesars announced Q2 earnings last night.
- Revenue of $2.2 billion fell shy of analysts' expectations, while losses doubled to $466 million.
- Mounting losses, unsustainable debt of $24 billion and a valuation of 17x adjusted EBITDA make Caesars a strong sell.
Bankruptcy Could Be In Caesars' Future After This Earnings Release
- Caesars fell short on revenue forecasts and completely bombed on earnings, reporting more than double the net loss investors expected.
- Although revenue did better than expected, the revenue growth came not from core casino growth but lower-quality one-time sources.
- With high debt and mounting losses, the future looks bleak for the casino operator moving forward.
- Caesars is expected to announced Q2 earnings on Monday.
- The company's flat-to-declining revenue and operating income do not justify its 16x EBITDA multiple.
- With $21 billion in long-term debt, which Moody's cites as unsustainable, Caesars is in deep trouble heading into earnings.
- Caesars is massively leveraged due to a previous private equity takeover.
- Caesars would be unable to survive any material decline in earnings.
- Apollo has significant ownership in Caesars and is currently engaged in a struggle with bondholders over plans to divest some of Caesars assets.
- Caesars receives notice of default from bondholders.
- Caesars Acquisition Company may present an interesting opportunity if Apollo is able to transfer more assets from Caesars.
Yesterday, 4:23 PM
- Empire Resorts (NASDAQ:NYNY) wins approval from the New York Gaming Facility Location Board to build a casino complex in the Catskills.
- The location will be the closer to New York City to any of the other potential casino sites in the state.
- Genting and Caesars Entertainment (NASDAQ:CZR) were shut out in their bid to build in Orange County, New York.
- NYNY was halted in the regular trading session on a volatility pause amid wild swings. Shares ended up down 10.5%.
Yesterday, 1:11 PM
- Leon Cooperman reports a 5.41% passive stake in Caesars Entertainment (NASDAQ:CZR). (SEC Form 13G)
- There has been more battling over the company's debt restructuring this week as a plan to separate Caesars' real estate business from its casino/hotel operations faces numerous legal hurdles.
- Shares of CZR are up 4.1% today on strong volume, but are off almost 20% over the last month amid restructuring and legal woes.
Tue, Dec. 16, 4:38 AM
- Caesars Entertainment Operating Company, the main operating unit of Caesars Entertainment (NASDAQ:CZR), says it will not pay $225M in bond interest payments in light of ongoing discussions with first lien bondholders.
- Caesars’ restructuring proposal would put its biggest unit into Chapter 11 proceedings by Jan. 15, allowing it to emerge as a REIT, although the negotiations have not led to a deal.
- SEC Form 8-K
Mon, Dec. 15, 9:07 AM
- The Gaming Facility Location Board in New York is scheduled to award four casino licenses in the state on December 17.
- The group's meeting will be streamed online starting at 2:00 p.m. ET.
- Bidders for the licenses include Penn National Gaming (NASDAQ:PENN), Caesars Entertainment (NASDAQ:CZR), and Genting Group.
Fri, Dec. 12, 5:56 AM
- Caesars Entertainment (NASDAQ:CZR) has reached a tentative deal with senior bondholders on a debt-restructuring plan for its largest unit, Caesars Entertainment Operating Company.
- The agreement moves the company closer to winning creditor support to back a restructuring plan that would put the unit into bankruptcy protection early next year and convert it into a REIT.
- Caesars is trying to convince enough creditors to back the plan before a mid-January interest-payment deadline.
Sat, Nov. 29, 10:29 AM
- Analysts with Gasbuddy.com predict some gas stations in the U.S. will offer $2 per gallon gas by Christmas.
- The last time the average price of gas in the U.S. was below $2 was in March of 2009.
- Forecasts from economists vary widely on the overall gas benefit to consumers for Q4. The high end from the group is an outlook of $300 per household, while the low end is closer to $100.
- Most analysts see an immediate lift for retail chains with large distribution channels. Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Costco (NASDAQ:COST), Dollar General (NYSE:DG), Family Dollar (NYSE:FDO), Dollar Tree (NASDAQ:DLTR), Big Lots (NYSE:BIG), and Five Below (NASDAQ:FIVE) come to mind.
- Airline stocks (JBLU, DAL, UAL, LUV, AAL, RJET, ALK, HA, ALGT, VA) have already ripped strong gains off the OPEC news, although some see even more long-term upside as forward fuel hedges get reworked.
- A sustained period of low gas prices should lift restaurant stocks (CAKE, CBRL, CMG, DNKN, DPZ, DRI, EAT, JACK, MCD, PNRA, RRGB, RT, SBUX, SONC, WEN, BWLD, THI, BDL, NATH, LUB, BKW, CHUY, BLMN, PZZA, TXRH, DENN, KKD, BBRG, DFRG, BOBE, RUTH, IRG, DIN) say some analysts.
- The gaming sector is (CZR, PNK, BYD, ISLE, CNTY, MCRI, MGM, NYNY) also an off-the-radar pick to bounce.
Mon, Nov. 24, 9:55 AM| Comment!
Thu, Nov. 20, 9:15 AM
Thu, Nov. 20, 8:38 AM
- Shares of Boyd Gaming (NYSE:BYD) move higher in premarket trading after Caesars Entertainment (NASDAQ:CZR) reportedly sets the wheels in motion to launch a REIT out its largest unit.
- REIT chatter has lifted some casino stocks in the past, although skeptics warn the tangled structure of Caesars isn't something for a buy-and-hold investor to bet on.
- Premarket: BYD +1.2%, CZR +18.2%
- Related stocks: ISLE, FLL, MCRI, PNK, UWN, CNTY.
- Related ETFs: BJK.
Wed, Nov. 19, 5:38 PM
Wed, Nov. 19, 4:37 PM| 11 Comments
Fri, Nov. 14, 9:47 AM
- Caesars Entertainment (CZR -0.2%) confirmed last night that a round of layoffs will impact less than 1% of its workforce.
- The job losses will be spread out evenly among properties and will include some corporate-level weaning.
- Shares of CZR are up over 30% this week despite the company's Q3 earnings miss as debt restructuring developments caught the attention of investors.
Thu, Nov. 13, 12:48 PM
Wed, Nov. 12, 12:45 PM
Wed, Nov. 12, 12:33 PM
- Caesars Entertainment (CZR +25.3%) trades higher after Bloomberg reports a deal has been worked out by the company with key creditors for a debt restructuring plan.
- A prearranged bankruptcy for the company's Caesars Entertainment Corporation unit is integral to the plan.
- Previously: Caesars Entertainment higher after report of deal with creditors
- CZR earnings call transcript
Tue, Nov. 11, 4:22 PM| 2 Comments
CZR vs. ETF Alternatives
Caesars Entertainment Corp is a casino-entertainment provider. The Company's business is mainly conducted through its wholly-owned subsidiaries, Caesars Entertainment Operating Company, Inc. and Caesars Entertainment Resort Properties.
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