Market downcast on Caesars Entertainment’s future outlook

Mark Frissora

The share price of embattled gambling operator Caesars Entertainment has dropped 10% to a $7.60 – $8.08 range as markets reacted negatively to the operator’s Q3 performance update (period ending 30 September).

Despite recording a 12% increase in revenues to $1.14 billion (£750 million), NASDAQ traders saw no positives for the operator which posted quarter net loss of $756 million (£500 million) and further missed its $1.6 billion expected revenue target.

The group’s 2015 woes continue as the operator struggles to control its near $1 billion in debt commitments to bond holders attached to its bankrupt operating division ‘Caesars Entertainment Operating Co’ (CEOC).

Furthermore industry analysts have stated that at present it is difficult to extract/separate Caesars Entertainment’s performance from its convoluted group structure.

Caesars’ Q3 2015 performance update was the first under new CEO Mark Frissora. The former Hertz Global CEO replaced twelve year leader Gary Loveman in July.

Frissora has been backed by Caesars’ main institutional investors, asset funds Apollo AM and TPG Capital. The new CEO has embarked on a restructuring of the business as the operator looks to drastically shed its debt.

Key to the turnaround will be convincing investors that Caesars Entertainment can operate as a single entity away from its indebt group.

Updating investors, Frissora stated that beleaguered CEOC is expected to meet its year-end cash flow projections. The division is seeking bankruptcy approval to separate into a real estate investment trust and eliminate $10 billion of the company’s $22.3 billion in long-term debt.

The CEO further plans to redevelop Caesar properties in Las Vegas, citing that hotel rooms needed to be upgraded in order to charge more competitive room rates and gain customers from competitors on “the strip”.

Whether Frissora can begin to turn around Caesars fortunes, as yet remains to be seen. However market confidence remains in short supply, as in 2015 Caesars Entertainment has seen its year share price drop from a $17.3 (high) to this week’s trading lows.

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