Caesars Entertainment May Consider Offloading Indiana Casinos

Article by : Erik Gibbs Jan 11, 2024

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A primary focus for Caesars Entertainment this year is the reduction of one of the gaming industry’s most significant debt loads. An opportunity to achieve this objective may come through the divestiture of the real estate holdings of two Indiana casinos.

According to Bank of America analyst Shaun Kelley’s recent report to clients, 2024 could witness the sale of Centaur Holdings, the holding company encompassing Harrah’s Hoosier Park and Horseshoe Indianapolis, formerly known as Indiana Grand.

Kelley anticipates that this sale could generate nearly $2 billion in net proceeds, contributing to a reduction in traditional and lease-adjusted leverage to below five times and aligning with their targeted range.

The probable buyer for these properties would be VICI Properties, the largest casino real estate investment trust.

This aligns with the agreement struck between Eldorado Resorts and VICI in June 2019, allowing the gaming company to sell or the REIT to acquire these assets between January 1, 2022, and December 31, 2024.

As of the conclusion of the third quarter, Caesars reported outstanding liabilities amounting to $12.29 billion.

While this figure represents a decline from the peak levels observed immediately after Eldorado finalized its acquisition of the company in June 2020, analysts and investors are urging the Harrah’s operator to persist in reducing its debt burden.

Caesars is widely recognized as a compelling deleveraging story in the industry, supported by management’s strides in debt reduction and a portfolio of assets capable of generating significant cash flow.

Despite being a subject of ongoing asset sale speculations, the company has not participated in such transactions over the past two years.

The Indiana casinos, Harrah’s Hoosier Park and Horseshoe Indianapolis, became part of Caesars through the company’s acquisition of Centaur Holdings in November 2017 for $1.7 billion.

These properties, along with Horseshoe Hammond and Caesars Southern Indiana, constitute the operator’s quartet of casinos in Indiana.

In periods of elevated interest rates, such as the current scenario, shares of heavily leveraged companies often lose favor among investors.

However, Caesars is demonstrating notable progress in addressing this concern, and its management team has a proven track record of cost reduction and debt management.

An encouraging aspect of the outlook is that some of the operator’s significant capital commitments are now behind them.

Bank of America’s Kelley highlights that, as identified project capital plans in locations like New Orleans and Danville conclude, coupled with a rise in free cash flow, Caesars may become increasingly attractive as leverage risks diminish.

The partnership with VICI further enhances this optimistic outlook. Caesars has a longstanding relationship with VICI, a partner not averse to making deals and potentially interested in expanding its non-Las Vegas casino real estate portfolio. Caesars stands as one of VICI’s largest tenants.