Caesars and Eldorado deal to close in June

by William Brown Last Updated
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The coronavirus pandemic and its impacts on the travel, gaming and hospitality industries has delayed the $17.3 billion merger of casino operators Caesars Entertainment and Eldorado Resorts and it is now due to close in June.

A source with firsthand knowledge of the matter told CNBC that the deal is definitely moving forward, despite reports from recent weeks that the unfolding coronavirus crisis could derail the merger, according to Casino News Daily.

The transaction needs approval from gaming regulators in states where Caesars and Eldorado operate properties.

However, the coronavirus stormed through the United States casino and hospitality sectors in an unprecedented manner, grinding commercial casino operations to a halt and forcing regulatory bodies to put the $17.3 billion merger on the back burner.

Reports emerged over the past several weeks that the coronavirus crisis could change the way regulators view the massive debt that goes along with the Caesars-Eldorado combination and eventually derail the deal.

Caesars and Eldorado await approval from Indiana, Nevada and New Jersey regulators.

The Federal Trade Commission also needs to sign off on the merger.

Nevada’s Gaming Control Board chair Tony Alamo said the regulator is still investigating the deal and that it “is going like any other merger. It’s just going through the process, which includes a normal investigation.”

Caesars and Eldorado previously expected to close the deal by mid-April, but according to multiple sources, this is now likely to happen in June.

The Nevada Gaming Control Board’s next meeting is scheduled to take place in April.

In New Jersey, the state Casino Control Commission is likely to hold its next meeting on May 13.

A highly placed source told CNBC that both casino operators have enough liquidity to last for well over a year, even though their properties across North America are currently closed and will remain closed for an unspecified time.

According to the source, Caesars currently has $3 billion on its balance sheet.

The recent sale of its Rio All-Suite Hotel and Casino property in Las Vegas for $640 million provided the company with additional cash.

If Eldorado closes a $230 million sale of two casinos in Mississippi and Missouri to Twin River Worldwide Holdings in the coming two months, it would head into the Caesars combination with $850 million on hand.

On March 17, Nevada Governor Steve Sisolak ordered a statewide 30-day casino shutdown as part of a set of measures imposed to curb the spread of the coronavirus.

The dangerous virus is raging across the United States, but some Caesars properties in Nevada have begun taking reservations.

The company’s Flamingo Las Vegas property tweeted last night that they are “currently taking reservations for April 17th and beyond, but the situation remains fluid.”

Eldorado and Caesars deal in jeopardy

Eldorado Resorts chief executive officer Tom Reeg has called the acquisition of Caesars Entertainment a “home run for all of our stakeholders.”

However, that home run may turn into a strikeout if the market doesn’t recover quickly.

Calvin Ayre reported last month that financial institutions have pledged to put more than $7 billion in loans and could find selling the idea to investors difficult, thanks to the coronavirus and what it has done to global financial markets.

Bloomberg points out that Credit Suisse Group, JP Morgan Chase & Co and Macquarie Group have all been onboard the acquisition, agreeing in June of last year to provide the necessary financing.

As the deal appears to be close to being finalised, with only a couple more regulatory approvals needed, the bank only has a little time left to convince bond and loan buyers that the “highly leveraged” deal makes sense.

Because of the coronavirus, stock trading was temporarily halted this week in order to prevent a further slide into a full-blown recession.

Still, trouble remains and the gaming industry, as a whole, is feeling the effects of the coronavirus.

Federal relief, in the form of stimulus incentives may be coming, but it could be too little too late for a rebound in time for the proposed acquisition.

Gene Neavin, a senior investment analyst and portfolio manager at Federated Hermes, explains, “The best comparison might be 9/11, when people were scared to fly. Now people may be scared not only to travel but also to be in a casino with thousands of people.”

Bloomberg tried to get input from the banks and the two casinos, but they all, with the exception of Macquarie, refused to comment.

Macquarie reportedly didn’t respond to requests for input.

The proposed funding would come via $2.4 billion in loans to Caesars and $4.8 billion worth of bonds and loans to Eldorado.

This is a massive amount of leveraged finance by any estimation and Eldorado is also counting on being able to reduce overhead by around $500 million to facilitate the process.

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