Caesars CEO eyes debt deal, says can finance Japan foray


TOKYO — Caesars Entertainment Corp. will likely agree to a debt restructuring with bondholders within a year and should have no problem financing a foray into the Japanese market, the debt-strapped casino operator’s chief executive said on Thursday.

Gary Loveman said he believed Caesars’ finances — its debt carries a speculative grade rating — would not put it at a disadvantage as it seeks a license in Japan, where a bill to legalize casinos could be put to a vote in parliament this year.

“A license in Japan will be so attractive that raising the money is not likely to be a big problem,” Loveman said in an interview with Reuters, adding that he was talking with potential partners for a possible entry into Japan.

Caesars is one of a dozen or so global operators that have been jockeying for position in Japan, which brokerage CLSA estimates could eventually generate $40 billion in annual gaming revenues, making it the second-biggest Asian market after Macau.

Loveman said it was too early to put a figure on how much Caesars might invest before tax rates, partnerships and other important factors are decided. Caesars plans to compete for a license in Tokyo and Osaka as well as in potential sites outside the big cities, such as Hokkaido or Okinawa, he said.

Standard and Poor’s has a CCC- long-term issuer rating on the company, a reflection of the $23 billion in debt on its balance sheet. The bulk of that debt is housed in a subsidiary called Caesars Entertainment Operating Co. (CEOC).

Earlier this month owners of CEOC second-lien bonds issued a notice of default, claiming its transfer some of assets to another unit and the removal of a parent company guarantee marked a default on obligations.

Caesars said in a filing that it did not believe a default had occurred, arguing that fair value on the asset sales had been determined based on a thorough and independent process.

With some $3 billion in cash, Loveman said there was no risk of CEOC going bankrupt. He said he expected to work out a settlement with creditors on debt restructuring within a year, clearing one important hurdle by the time Japan could start the application process for casino licenses in 2016.

“I am quite confident that the circumstances of this entity (CEOC) will be resolved,” Loveman said, adding that a settlement would likely involve the swapping of cash, equity or new debt securities with lower interest expenses or longer maturities.

Caesars views Japan as an important component of its Asia strategy after it failed to secure a spot in Macau, the world’s largest gambling hub. It would also complement a planned foray into South Korea, where the U.S. operator is building a gaming resort after receiving preliminary approval in March.

Japan’s Prime Minister Shinzo Abe has thrown his weight behind casinos as a way to revitalize the economy, fueling confidence among proponents that the casino bill will be passed during a special session of parliament expected in October.

 

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