Caesars shares hammered
Judge gives creditors small win in lawsuit against parent company
Investors hammered the stock price of Caesars Entertainment Corp. over the past two days after a federal judge handed a small victory to creditors seeking to collect $750 million from the casino company’s bankrupt operating division.
Shares of Caesars, traded on the Nasdaq, fell 26 cents, or 3.31 percent, to close at $7.60, the company’s lowest closing price since February 2013. On Monday, Caesars’s shares declined 16 percent in the first trading day after Bloomberg News reported the judge’s ruling late Friday.
The lawsuit is one of several legal actions being taken against Caesars by several creditor groups who fear they will be cut out of recovering any funds through the Chapter 11 bankruptcy reorganization of Caesars Entertainment Operating Co. The division was placed into a pre-packaged bankruptcy in January.
Creditors are suing Caesars over the company’s sale of several casinos, including Planet Hollywood Resort, Bally’s Las Vegas and Harrah’s New Orleans, to subsidiary Caesars Growth Partners in 2014. Caesars Entertainment plans to merge Caesars Growth Partners back into the parent operation after the bankruptcy is concluded.
Caesars outside spokesman Stephan Cohen of Teneo Holdings told Bloomberg News in an email the company has
Lawsuit could impede operations
Corp. together operate nearly 20 Strip properties that draw from a varied customer base.
The Strip has become a different dynamic. Almost 65 percent of all revenue is from nongaming attractions.
May was fueled by two large events: the Floyd Mayweather Jr.-Manny Pacquiao fight and the Rock in Rio outdoor music festival. MGM Resorts Chairman Jim Murren said the fight created “one of the highest revenue per available room weekends ever in the history of the company.”
It will be tough for the Strip to beat May 2014’s $593 million in gaming revenue, but the casinos might come close.
No one, however, is sure what brought on Wynn’s negative comments.
Maybe he was distracted after winning a nasty proxy fight with his ex-wife.
Maybe he got wind that Wynn Resorts’ largest stockholder, T. Rowe Price Group, was reducing its ownership stake by 40 percent, selling almost 7 million shares.
Maybe Wynn was thrown off by the social media outrage created by Yelp when his company tried to change Nevada’s strong anti-SLAPP law.
(SLAPP lawsuits, an acronym meaning strategic lawsuit against public participation, are aimed at stifling free speech when individuals speak out on public issues.)
Whatever the case, observers said Wynn’s view of Las Vegas was off-base. During Wynn Resorts’ first-quarter earnings call, Wynn appeared to answer his own questions posed to Wynn Las Vegas President Maurice Wooden.
“Here’s two of us saying we’d be thrilled if noncasino revenue was flat in the second quarter as it was in the first,” Wynn said. “My guess is that that’s going be a struggle.” The comments were perplexing. “I’m not really not sure what drives Steve to say that,” Caesars Entertainment Corp. Chairman Gary Loveman said a week later. “I am not sure exactly what was provoking Steve beyond that, but we feel very enthusiastic about what we see here for the remainder of the year.”
Murren, without directly naming Wynn, said, “We don’t understand the more negative views that I’ve heard about what’s happening in the current quarter.”
No one expects Las Vegas to repeat prerecession gaming numbers from 2006 and 2007. The construction of the $4 billion Resorts World Las Vegas and the opening of a new convention center on the site of the closed Riviera, will boost give the north Strip — including Wynn’s properties. But that will take time. The worry is Macau. Galaxy Macau opened an expanded casino last month, but regulators gave the property just 150 of the requested 500 gaming tables. Wynn Macau and Wynn Encore operate 467 tables in the mass market and high-end segments.
Wynn Palace is seeking 200 table games. Deutsche Bank gaming analyst Andrew Zarnett said Macau regulations allow the company to make up the shortfall by transferring tables from the older properties to the new casino.
Undaunted, Steve Wynn says Wynn Palace will be more than just a casino. It will have Macau’s “most extravagant exercise” in nongaming attractions.
“It’s going be the big photo op for Macau,” Wynn said. “And it will show up next year, hopefully with enough tables to allow it to prosper.”