Funding Caesars Entertainment’s capital expenditures



Why capital expenditures

Caesars Entertainment Corporation (CZR) incurs capital expenditures, or capex, for the refurbishment and maintenance of existing casino entertainment facilities. The company also incurs capex to pursue development and acquisition opportunities for additional casino entertainment and hospitality facilities, and online businesses that meet its strategic goals and return-on-investment criteria.


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Capital expenditures

The above chart shows CZR’s quarterly trend in capital expenditures. CZR’s capital spending totaled $817 million in 2014 year-to-date (or YTD), which is mainly because of the Horseshoe Baltimore development and the redevelopment of The Cromwell. Project financing totaling $400 million was used for these two development projects.

Las Vegas Sands Corp. (LVS) and MGM Resorts International (MGM) respectively incurred $793 million and $617 million in capex in 2014 YTD.

The Consumer Discretionary Select Sector SPDR Fund (XLY) and the VanEck Vectors Gaming ETF (BJK) help investors gain overall exposure to casino companies.


The above chart shows CZR’s projected capex in 2014. CZR’s estimated total capital spending for 2014 is expected to be between $990.0 million and $1,105.0 million. Future capital spending will be primarily related to renovations for The LINQ Hotel.

Capital expenditure funding

Capex is funded by cash flows generated by CZR’s operating activities and established debt programs. Cash used for development projects and additional projects is funded using established debt programs, specific project financing, and additional debt offerings.

Proceeds not used for capex are required to purchase term loans under Caesars Entertainment Operating Company’s credit facilities.

Key takeaways from the 3Q14 earnings call

Gary Loveman, Chairman, CEO, and President at CZR said, “The level of activity that we’ve experienced recently has been historically very high. So with the completion of The LINQ, a big chunk of the renovation of what used to be known as The Quad concluded. The amount of capital expenditure we anticipate for next year will be very substantially below what it’s been the last couple of years.”


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