Banks ready Us$7.2bil debt sale for casino buy
Deal to include leveraged loans and high-yield bonds
NEW YORK: A group of banks led by Jpmorgan Chase & Co and Credit Suisse Group AG is readying a Us$7.2bil debt offering to finance Eldorado Resorts Inc’s acquisition of Caesars Entertainment Corp, according to sources.
Lenders began marketing some of the debt, among the largest commitments signed before the Covid-19 pandemic, on Tuesday, said the sources.
The offering is expected to include leveraged loans and high-yield bonds, they said.
The banks agreed to the financing a year ago, and recently negotiated better terms that give them flexibility to shift a substantial portion of the debt from leveraged loans to secured bonds, according to the sources.
That change isn’t expected to impact the company’s borrowing costs materially, but it will relieve banks from their original commitment to sell around Us$5.2bil of the debt in the loan market where prices remain below levels reached before the outbreak, a source said.
The deal with be financed with a mix of Caesars and Eldorado debt. Credit Suisse is leading the debt sale for Caesars, while Jpmorgan leads the financing for Eldorado.
Representatives for Credit Suisse, Eldorado and Jpmorgan declined to comment. A representative for Caesars declined to comment on the financing but said the company continues to work toward the closing of the acquisition.
The purchase of Caesars is one of the riskiest deals yet to close from the pre-virus era, and will make Eldorado -- once a small, family-run casino business – the largest operator of gambling establishments in the United States. The company is also planning to issue new shares, sell some Las Vegas real estate and take other steps to strengthen its finances. The stock offering could generate about $800 million.
Leveraged loan prices have recovered to about 90 cents on the dollar, while an ebullient credit market has seen junk bonds recoup nearly all of their losses this year. Other acquisition financings including for Apollo Global Management Inc’s buyout of Tech Data Corp have also launched this week. Radio Systems Corp, which owns Petsafe, is marketing a Us$625mil junk bond offering to finance its buyout by Clayton, Dubilier & Rice.