What Caesars Entertainment can do to service its debt
Cash and cash equivalents
Caesars Entertainment Corporation’s (CZR) operating unit Caesars Entertainment Operating Company (or CEOC) is heavily burdened by ~$18.4 billion in debt. Currently, CEOC doesn’t expect that its cash flows from operations will be sufficient to repay its indebtedness. Likely, it will need to pursue additional debt or equity offerings, or seek refinancing, an amendment, private restructuring, or reorganization under Chapter 11 of the US Bankruptcy Code.
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CZR’s consolidated cash and cash equivalents stood at $3,182 million as of September 30, 2014. Casino companies Las Vegas Sands Corp. (LVS) and Wynn Resorts, Limited (WYNN) have respective cash and cash equivalents of $2,484 million and $2,891 million, as of September 30, 2014. CZR generated $4,070 million in cash through issuance of debt in 2014 year-to-date.
Cash flow crisis
CZR experienced negative operating cash flows of $422.0 million in 2014, including negative operating cash flows of $548.7 million from CEOC. Adding to that, CZR expects negative operating cash flows for the remainder of 2014 and the foreseeable future. CEOC doesn’t believe that its cash flows from operations, combined with existing liquidity sources, will be sufficient to repay its indebtedness.
Prior to October 1, 2014, CZR’s properties, including properties held by CERP and CGP subsidiaries, were managed by CEOC. CZR has historically been reliant on CEOC to generate cash flows for the company.