In his remarks to Nevada gaming regulators Wednesday afternoon, Eldorado Resorts Executive Director of the Board Gary Carano pondered what his late father might have thought of the proceedings.
The once small, family-owned, single-casino operation from Reno is now a few weeks away from becoming the largest regional gaming company in the U.S. when it finalizes a $17.3 billion acquisition of Caesars Entertainment.
In some ways, Carano still considers the culture of Eldorado to be that of a small, family-run business.
“My father would be very proud of us today,” Carano said of late family patriarch Don Carano, who, in addition to founding Eldorado Resorts, established the Ferrari-Carano Vineyards in California and the Nevada-based McDonald Carano law firm.
Nevada’s Gaming Control Board and Gaming Commission signed off on the deal during an unusual two-part, four-hour hearing in Las Vegas. Approvals from gaming boards in Indiana and New Jersey are all that remain before Eldorado controls nearly 60 properties in 16 states.
Alas, the corporate name, Eldorado, will disappear in favor of Caesars once the deal is finalized. Carano said the name Eldorado was in reference to his father’s favorite vacation spot, the El Dorado community in Palm Springs, California.
The ‘socially distanced’ Nevada Gaming Control Board, Sandra Douglass Morgan, Philip Katsaros and Terry Johnson (on the monitor)/Photo by Howard Stutz
Caesars, as well as the brands Harrah’s and Horseshoe, company executives said, will have more attraction in the gaming universe.
“There is only one Caesars Palace,” Carano said. “Caesars is a brand known worldwide.”
That’s one reason for the corporate name change. The combined company – “New Caesars” as it was referred to Wednesday – is no longer the small family business.
Carano said the company had looked at acquiring Caesars in 2018, a year before the gaming industry’s largest and most expensive transaction was announced in June 2019.
Much of the discussion Wednesday centered around the financial aspects of the transaction.
Eldorado had nearly $3 billion in debt on its books at the end of March. That figure will jump to almost $13 billion once the companies are merged.
However, the roughly $12 billion in long-term lease payments Eldorado will owe to real estate investment trusts Gaming and Leisure Properties and VICI Properties company increases the company’s total debt load to some $25 billion. Analysts said the investment community and common accounting principles count leases as debt.
“This is a sizeable transaction here, and my concern is the elephant in the room, which is the amount of debt,” said Gaming Control Board Member Terry Johnson.
Added Control Board Chairwoman Sandra Douglass Morgan, “you’re picking up a lot of debt in a very short amount of time.”
Eldorado Chief Financial Officer Brent Yunker said the new debt isn’t due before 2024 and that the company has $4 billion in liquidity. He said also that several “creative transactions” have boosted the company’s financial prospects.
Yunker told gaming regulators Eldorado and Caesars lost a combined $1 billion on properties that have been forced to close because of the coronavirus pandemic, but added that the merged company had enough cash on hand to “get to the other side of this crisis.”
In the past month, Eldorado raised more than $3 billion in new debt to help finance the Caesars transaction and another $772 million from a stock sale to boost its liquidity.
Eldorado will enter into a $400 million, five-year mortgage with VICI Properties for the 500,000 square-foot Caesars Forum Convention Center on the Strip behind the Linq Promenade and High Roller Observation Wheel. Caesars Entertainment built the project for some $375 million.
VICI will also pay Eldorado $103.5 million to acquire 23 acres of undeveloped land parcels adjacent to the Caesars Forum and behind Harrah’s Las Vegas, Linq Resort, and Flamingo Las Vegas.
Yunker also said “asset sales” will help pay down debt. Two of the five properties the combined company will own in Indiana will be sold, and the firm plans to also liquidate at least one of the eight Strip resorts currently operated by Caesars.
“It’s too heavy of a portfolio,” Yunker said. “All are incredibly valuable… we’re going to divest a Strip asset in the first 12 to 24 months.”
The Gaming Control Board hearing was “socially distanced.”
Meanwhile, Eldorado is selling Eldorado Shreveport in Lousiana and the operations of MontBleu Resort Casino in Lake Tahoe, Nevada to Rhode Island-based Twin River Worldwide Holdings for a combined $155 million.
CEO Tom Reeg said following the Nevada hearings that the company is forecasting $900 million in cost savings from the merger, which includes $500 million in previously discussed savings and an additional $400 million in cost savings related to casino closures and reductions during the COVID-19 pandemic.
Two other notes of interest came out of the hearings.
Current Caesars board member Jan Jones Blackhurst will become a member of the “New Caesars” board and head a committee overseeing social responsibility.
Also, current Caesars CEO Tony Rodio will remain with the company as a strategic advisor to Reeg and longtime Caesars executive Gary Selesner will become president of the Las Vegas properties.
Reeg said Rodio will assist with the company’s efforts to win a casino license in Danville, Virginia, help with the expansion of Harrah’s New Orleans, and advise on renovations at Tropicana Atlantic City.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgaming.com. Follow @howardstutz on Twitter.
