Logo: Caesars Entertainment

Watching Caesars Entertainment (NASDAQ:CZR) over the last few years has been like watching a really bad movie, one you hope will have a redeeming ending, but never does. With three years of solid disappointing earnings and operating decisions, the company just can't seem to stop the bleeding.

While the company now scrambles to restructure its debt with a plan that includes agreeing to merge with affiliate Caesars Acquisition Company (NASDAQ:CACQ) and proposing to restructure subsidiary Caesars Entertainment Operating Co. (CEOC), we have to ask how the company could get so far down the wrong track, especially as competing gaming companies like Las Vegas Sands (NYSE:LVS) and MGM Resorts International (NYSE:MGM) have thrived in both Asia and Las Vegas.

With missed opportunities around the world, poor operations in the U.S., and now what could be a potential bankruptcy filing, here's how Caesars might be in the running for the worst bet in the gaming industry.

Failed attempts in Asia
Las Vegas Sands and other companies boosted revenue and profit substantially in the last few years by making major bets on Asia with casinos and resorts in Macau and Singapore, bets that have performed extremely well. While the recent slowdown in Macau has hurt those revenues in the last two quarters, these companies' Asian operations are still driving incredible earnings, well ahead of anything Caesars has produced in years.
Where is Caesars' share of this growth in Asia? The company had an opportunity to build resort casinos in both Macau and South Korea, but neither came to fruition. Caesars had a sizable chunk of property in a great part of Macau. However, the company failed to obtain a gaming license from the local government, something that six other companies succeeded in getting.
In South Korea, the company was in talks with the government and expected to win a bid to build a major integrated casino resort. Then, in a surprise to Caesars management, the government in summer 2013 pulled the plug and the company lost the bid. Reasons for the lost bid weren't made official, but are suspected to involve the Korean government's uneasiness with Caesars' incredibly high debt load and questions about the business' long-term viability.
Following these setbacks, Caesars management sold its Macau property, eliminating all chances of having an Asian resort anytime soon.

Failing in the U.S.
Despite all of that, Caesars should have at least been able to focus on its domestic properties to generate growth. Yet the company has actually posted substantial losses for the last three years on its U.S. operations.

Las Vegas has reported more annual gaming revenue in 2014 than in any year since 2007, and it continues to climb. Compare Caesars' losses to the numbers from MGM, which reported higher year-over-year Las Vegas property EBITDA each quarter of 2014 thanks to increased revenue and higher operating margin.
What's the problem for Caesars in Las Vegas? Most casinos are having a hard time on the U.S. East Coast, but in Las Vegas, where Caesars gets about half of its revenue, the company has not benefited from the resurgence in visitors and revenue. In the most recent earnings report, management blamed a decline in high-net worth international players, interest and expenses related to paying off its large amount of debt, and unfavorable "hold," (the term used to describe the portion of gaming wagers won by the house, meaning, the company's good or bad luck).

Leading to potential bankruptcy filing
In November 2013, following the South Korea and Macau disappointments, Caesars CEO Gary Loveman said, "The conditions the company faces today are better and not worse than they have been before," and that "We're much better structured. There is nothing that would trigger a liquidity crisis." He added that bankruptcy reorganization was "not an option." That was about one year before that latest bankruptcy rumors started.

Loveman and his managers have been busy shuffling debt and assets between Caesars Entertainment (the parent company) and subsidiary Caesars Entertainment Operating Co. As early as March of 2014, the company announced reorganization of its debt between these entities to make the companies operate more efficiently.

After billions of dollars in debt was passed down to CEOC, the company held talks with creditors over the last several months that culminated in a plan to allow CEOC to enter Chapter 11 bankruptcy protection, taking with it their debt obligations.

So while Caesars failed to create an international presence in the hot gaming spots, other companies like Las Vegas Sands were reaping huge rewards in Asia. And while Caesars has been failing in the U.S., other companies such as MGM have been winning on the resurgence of revenue in Las Vegas. Going forward, even if the company is capable of restructuring, decreasing its debt burden, and continuing operations, this track record and little evidence of turning things around for the better in the future continues to support the case that Caesars is the worst bet investors can make in the gaming industry.