Harrah’s New Orleans Casino Outperformed Its Local Rivals in April 2014
Caesars Entertainment Corporation completed the sale of Harrah’s New Orleans on Tuesday. The sale was approved by the Louisiana Gaming Control Board on Monday of this week.
The selloff comes in a month where Harrah’s New Orleans Casino had outperformed its local competition. While the gaming industry of the New Orleans metropolitan area saw a revenue decline of almost 5%, Harrah’s New Orleans was up almost 4% from the previous month.
Caesars Growth Partners
Harrah’s New Orleans Casino’s new owner is Caesars Growth Partners, “a casino asset and entertainment company” which buys high-growth assets, equity, and debt investments. Shareholders of Caesars Entertainment are allowed to buy stock of Caesars Growth Partners, though the parent company is given the right to buy back those shares at a later date.
Caesars Growth Partners was formed in April 2013 to help the parent company with its spiraling debt situation, estimated to be $23 billion. One reason for the company’s launch was to build a healthy online gaming portfolio through Caesars Interactive. Since April 2013, Caesars Growth Partners has bought land-based assets like Planet Hollywood Las Vegas, Bally’s Las Vegas, aThe Quad Resort & Casino, and The Cromwell in Las Vegas. Also, Growth Partners is involved in the development of Horseshoe Baltimore as a joint venture.
While Growth Partners is a separate entity, it has the ability to access Caesars Entertainment’s long experience managing gaming properties, along with its pivotal customer database. The announcement of the sell on Tuesday included information that day-to-day operations at Harrah’s New Orleans will not be affected. The casino remains a part of the Total Rewards network.
$2 Billion Refinancing Plan
Along with the purchase of Harrah’s New Orleans Casino, Caesars Growth Partners said it had refinanced the debt on 3 of its previous purchases: The Cromwell, the Quad, and Bally’s Las Vegas Casino. According to the press release, the refinancing included $476.9 million in debt assigned to the Planet Hollywood Casino.
New Orleans Revenue Down
The sale came one day after it was announced that monthly revenue for New Orleans’ gambling industry had fallen in April 2014. Overall revenues in New Orleans fell by 4.8%, a significant amount. Better weather might have accounted for the decline in revenues, as gamblers might have preferred to stay outdoors after an unusually cold and harsh winter.
Harrah’s New Orleans Casino, on the other hand, had a promising April 2014. According to the Louisiana Gaming Control Board, revenues were up 3.3% in April. Given the wider decline throughout the city, the boost in revenues is of particular good news to Caesars Growth Partners.
Caesars Interactive Portfolio
Caesars Interactive is a part of the Growth Partners’ portfolio. The interactive division includes the mobile and social gaming handled by Caesars Entertainment and its subsidiaries. This include the World Series of Poker iGaming portal in the New Jersey market. Caesars Interactive is a key player in the regulated New Jersey online gambling venture. Despite somewhat disappointing returns in the first 6 months of New Jersey’s online gaming rollout, Caesars Interactive holds out promise that it might become a major source of revenue.
Debt Situation Looms over the Corporation
The sell of Harrah’s New Orleans is a further sign that Caesars Entertainment Corporation is facing major financial difficulties. In the past month, Caesars CEO Gary Loveman has indicated he believes the Atlantic City gaming market is saturated, and at least one casino needs to close its doors. Loveman indicated that casino is likely to be one of Caesars Entertainments’ four casinos in Atlantic City.
Also last month, Harrah’s Tunica Casino closed its doors. At the time, the president of Caesars Entertainment’s Central Division, John Payne, said the Mississippi casino had been closed only “after exploring every other viable alternative.” Such closings and selloffs have led to a great deal of speculation in the gambling industry that Caesars Entertainment is headed to bankruptcy.
Caesars Entertainment Corp was bought by Apollo Global Management and Texas Pacific Group in January 2008 for $30 billion. When the global economy entered a major recession in September 2008, the gaming company was left with gargantuan debt situation. Six years later, the company still owes $23 billion.
