Exec’s exit may create scramble for Caesars

To use a cooking analogy, you don't want to the see your head chef fleeing the kitchen just as the appetizers are headed to a table of food critics.

But that's exactly what took place at the end of May in the offices of Caesars Entertainment Corp.

Chief Financial Officer Jonathan Halkyard is departing the casino giant after nearly 13 years for a similar position with power utility NV Energy.

Halkyard, who held corporate finance and casino operations roles with Caesars and its predecessor Harrah's Entertainment before he was named CFO in 2006, is leaving when the company's expansion and financial initiatives are cooking on the stove. The menu includes possible casino projects in Boston, Baltimore and Toronto, and a potential sale of stock that could raise $500 million.

Several gaming sources close to the company said Halkyard grew tired of the direction set by Caesars' private equity majority owners, Apollo Management Group and TPG, which took the company private in a
$29 billion buyout in January 2008.

Halkyard has operated for four years under the overhang of nearly
$20 billion in long-term debt. He helped negotiate extensions of debt maturities and refinancing to give Caesars some financial breathing room.

Halkyard, in an interview Wednesday, dismissed any talk of unhappiness at Caesars. He said he's known NV Energy CEO Michael Yackira for several years, but they started talking about the CFO position in earnest a few months ago. He also has other ties to the utility, whose chairman is retired Harrah's CEO Phil Satre, Halkyard's former boss.

Plus, the new job allows him to remain in Nevada.

"This was an unique opportunity and a challenge to learn a new industry," said Halkyard, who worked in banking and for a media company before joining the then-Harrah's Entertainment in 1999. "It was the first job interview I had in 13 years."

In terms of timing, the departure was obviously not planned. The companies didn't coordinate their announcements and public statements on Halkyard, which rolled out within minutes of each other on May 30.

Caesars' release came first, sounding ominous in that it wished Halkyard well without mentioning that he was going to a new job. Nor did the casino operator name a replacement. Senior management, including chairman and CEO Gary Loveman, will assume Halkyard's responsibilities on an interim basis while a replacement is sought.

"Probably the timing is never good for Caesars," Halkyard said. "Since 2004, there is always some type of the growth effort or expansion opportunity taking shape."

The analyst community was mute on the change.

A day after Halkyard's resignation, Macquarie Securities gaming analyst Chad Beynon initiated coverage of Caesars with a "neutral" rating. He mentioned Halkyard's departure, but the issue didn't factor into his assessment, which had already taken a cautious view of the company.

Caesars shares had three straight down days on the Nasdaq Global Select Market last week, closing Friday at $12.03, down 7 cents, or 0.58 percent, from the day before. But the performance was more of a reflection of the overall stock market than investors' reaction to Halkyard's sudden resignation.

Halkyard is initially taking a pay cut with his new job.

According to Caesars' S-1 filing with the Securities and Exchange Commission for its stock sale, Halkyard earned more than $1.7 million in salary and other compensation in 2010. His annual base salary was $700,000.

According an SEC 8-K filing by NV Energy on June 1, Halkyard's base pay will be $500,000. He'll also be eligible for several short- and long-term incentives that could pay as much as 75 percent to 150 percent of his base salary. Add to that 60,000 restricted shares of NV Energy stock. The company's stock closed Friday at $17.31 on the New York Stock Exchange, up 6 cents, or 0.35 percent, from the day before.

So where does Caesars sit without a head chef in the kitchen? Good question.

Halkyard has been busy. He played an essential role in the company's recent financial events, including February's initial public stock offering, financing for the Strip's $550 million Project Linq development, the opening of the
$350 million Horseshoe Casino Cleveland, and Project Renewal, Loveman's cost-containment plan that could save the company $400 million annually.

Caesars also agreed in May to sell its Harrah's St. Louis to Penn National Gaming for $610 million.

Without a permanent CFO, Caesars expansion opportunities - especially preliminary developments in New York and Toronto - could face a stiffer challenge from casino industry rivals.

Last week, the Caesars and the Suffolk Downs racetrack unveiled a proposed $1 billion hotel-casino complex in east Boston. Although it's the odds-on favorite, the partnership still must file its license application with Massachusetts gaming authorities.

Wall Street and investors also like to talk with a permanent CFO.

Perhaps they'll start calling someone who already knows the business.

"I had eight direct reports at Caesars and they are all very capable," Halkyard said.

Time will tell whether Halkyard's departure gives Caesars an all-new menu or turns into the last supper.

Howard Stutz's Inside Gaming column appears Sundays. He can be reached at hstutz@reviewjournal.com or 702-477-3871. He blogs at lvrj.com/blogs/stutz.
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