What happened
Shares of gaming giant Caesars Entertainment Corp (CZR) jumped 15.1% in September, according to data provided by S&P Global Market Intelligence, as the company moved closer to finalizing its reorganization. Once completed, the reorganization will reduce debt and should restore some operational stability to the company.
So what
Caesars has received approval from all gaming regulators to reorganize the company into an operating company and a REIT, a process it expects to complete this week. Caesars has also announced the pricing of $5.7 billion in senior secured debt and $1.7 billion in senior notes due 2025, which was a key part of the process.
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As Caesars moves closer to its reorganization, investors have started to examine what the company's valuation looks like. A presentation management gave in September estimated that its enterprise value to EBITDA ratio is just 8.8, which would make it the cheapest of the major Las Vegas Strip casino companies.
Now what
Emerging from the cloud created by the bankruptcy of its largest subsidiary will be a positive for Caesars Entertainment, no doubt. But it doesn't mean the stock is a great buy today. Most of Caesars' resorts are in regional gaming markets, where its casinos are aging and losing market share. Even in Las Vegas, Caesars owns some of the oldest resorts on the Las Vegas Strip.
Until we know final debt levels and cash flow from resorts, this is a stock I'll stay out of. It's just too speculative, especially with current shareholders only getting 8.7% of the company as it will eventually be constructed.
