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Caesars bankruptcy shouldn't affect Horseshoe

Caesars unit teeters toward bankruptcy

The division of Caesars Entertainment Corp. that operates the Horseshoe Casino Baltimore filed for bankruptcy protection Thursday, but customers of the Russell Street gambling destination should barely notice the restructuring.

"There will be no impact to operations or customer programs at Horseshoe Baltimore," Caesars spokesman Stephen Cohen said Wednesday, explaining that "Horseshoe Baltimore is not part of any planned or possible Chapter 11 filing."

Las Vegas-based Caesars Entertainment announced Thursday that its main operating unit, Caesars Entertainment Operating Co., sought bankruptcy protection from its creditors Thursday in Chicago.

Horseshoe is run by the operating company but part-owned by another unit of the Caesars gambling empire, Caesars Growth Partners. The bankruptcy shouldn't have any effect on employees or its suppliers, the company indicated.

The $442 million casino opened on Aug. 26 and has underperformed state expectations by about a third, due in part to stiff competition from Maryland Live, a dozen miles away at Arundel Mills mall in Hanover. Horseshoe reported $22.9 million in revenue from slot machines and table games in December, down about 2 percent from November.

For the Horseshoe and other existing properties, "customers won't even notice it initially," said Alan Woinski, president of Gaming USA Corp., which publishes industry newsletters. "It's a big enough company that people won't be distracted and in reality it will be a stronger company afterwards."

While the bankruptcy filing "won't mean much of anything" for Horseshoe in the short term, said Christopher Jones, an analyst for Union Gaming Group, the restructuring could allow Caesars in the long term to reinvest in existing properties more than today.

"As Baltimore ages — a year or two down the line — some of the slot machines may feel a little stale," Jones said. "A recapitalized environment could make it easier for them to make those necessary investments."

If all goes according to the company's plan, drawn up with its most senior creditors, it should be business as usual for Caesars casinos — doors will remain open, slot machines will still sing, chips will rest atop tables.

"Caesars is, in a certain sense, a Nevada version of `too big to fail,'" said Michael Green, a history professor with the University of Nevada, Las Vegas.

Caesars is one of the largest casino operators, employing about 68,000 people worldwide at more than 50 casino properties, including Caesars Palace on the Las Vegas Strip.

But the company has lost money each of the past five years, including $2.9 billion in 2013.

It's been crippled by billions in debt it carried into the recent recession, which pinched consumer spending as jobs were lost and wage growth slowed. The debt is a byproduct of its 2008 buyout by a pair of private equity firms that are endeavoring to save their investment through the bankruptcy.

The deal to buy Caesars (then known as Harrah's) was first announced in 2006 during the heyday of Vegas tourism and development. But it didn't close until January 2008, several months before Lehman Brothers would go bankrupt, shaking the economy to its core. And it was a nearly $30 billion deal, with the two firms taking on more than $10 billion of existing debt and relying on several billion more in bonds to pay for the company.

Caesars also missed out as competitors found fortune in Asia's casino growth while stateside gambling in Las Vegas and Atlantic City waned. As other companies invested in arenas and shopping districts on the Strip or casinos in newer gambling markets across the country, analysts say, Caesars was reluctant to spend.

It went private, then public again to raise cash and created new related companies, shifting its properties from one to another to free them up from the debt cordoned off in one spot, its Caesars Entertainment Operating Co. That's the company now headed to bankruptcy court.

Regardless of the maneuvers, "the fundamentals were not there to support the amount of debt that they had," said Keith Foley, an analyst with Moody's Investors Service.

Last year, the company closed properties in Atlantic City, London and Mississippi and said it would cut its global workforce by less than 1 percent. But it also opened the Baltimore Horseshoe, which is 41 percent owned by Caesars Growth Partners. Detroit-based Rock Gaming owns 29 percent, and other investors own the balance.

The Maryland Lottery and Gaming Control Agency said Wednesday it was continuing to monitor developments. Stephen Martino, the agency's director, said in December that agency and the Gaming Control Commission have known of the company's financial condition and been monitoring it since the license was awarded in 2012.

"We will continue to communicate closely with Caesars management and monitor its progress and activity to ensure the company's reorganization plans ameliorate its financial situation," Martino said.

Caesars faces irked creditors, a few who tried to force the casino giant into bankruptcy in Delaware against its will this week. Others have sued, claiming the company stripped Caesars Entertainment Operating Co. of most of its valuable assets. Caesars called the claims meritless and alleges some of its holdout creditors are hoping for the company's demise in order to win wagers predicting it.

Despite the acrimony, the company says that after months of negotiations it has more than 60 percent of the holders of its first-priority debt on board with its plan.

The plan would shed $10 billion in debt from its weighed-down operations division, leaving it with $8.6 billion and winnowing its annual $1.7 billion in interest payments to $450 million. Senior creditors who approved the plan would get cash and new debt to make them whole.

The Associated Press contributed to this article.

jebarker@baltsun.com

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