{"id":1030,"date":"2024-09-17T15:45:36","date_gmt":"2024-09-17T15:45:36","guid":{"rendered":"https:\/\/extraniceshirts.org\/?p=1030"},"modified":"2024-10-01T14:43:33","modified_gmt":"2024-10-01T14:43:33","slug":"caesars-set-for-lower-rate-perks-could-sell-linq-promenade-says-analyst","status":"publish","type":"post","link":"https:\/\/extraniceshirts.org\/index.php\/2024\/09\/17\/caesars-set-for-lower-rate-perks-could-sell-linq-promenade-says-analyst\/","title":{"rendered":"Caesars Set for Lower Rate Perks, Could Sell Linq Promenade, Says Analyst"},"content":{"rendered":"

The Federal Reserve is nearing its first interest rate cut in four years, which is none too soon for debt-laden companies such as Caesars Entertainment (NASDAQ: CZR).<\/p>\n

\"Caesars
Caesars Palace Las Vegas. The operator could sell the Linq Promenade and is poised to benefit from lower interest rates. (Image: YouTube)<\/figcaption><\/figure>\n

In a new report to clients, B. Riley analyst David Bain points out that since the Fed commenced its tightening cycle in March 2022, shares of Caesars slid 50% compared to an average loss of 3% for the casino operators in his coverage universe. The only comparable gaming name that performed worse over that span was Penn Entertainment (NASDAQ: PENN), which tumbled 55%.<\/p>\n

Bain also observed that despite the interest rate headwinds, Caesars\u2019 2024 estimated earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) is 18% higher than the reported 2022 figure. Other data points confirm the gaming company\u2019s leverage to lower borrowing costs.<\/p>\n

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For every 100 basis points in lowered rates, CZR\u2019s interest expense declines\/free cash flow increases by $60 million. We believe CZRs could also look to refinance its $1.6 billion 8.125% fixed senior notes sometime next year, as rates are likely to continue to fall, in our view,\u201d wrote Bain.<\/p>\n<\/blockquote>\n

Some market observers believe the Fed could pare rates<\/a> by 150 basis points by the second quarter of next year, implying Caesars could see a larger boost to free cash flow than $60 million before the end of the first half of 2025.<\/p>\n

Caesars Can Make it Rain with Asset Sales<\/h2>\n

Earlier this year, Caesars CEO Tom Reeg said the operator is open to selling noncore assets<\/a> to raise cash that could be used to reduce its debt burden. He didn\u2019t elaborate on what those assets could be.<\/p>\n

Bain speculated that Caesars could consider selling the Linq Promenade, the retail space adjoining that Strip property. Such a transaction could generate $700 million in proceeds, Bain said.<\/strong><\/p>\n

Caesars has already engaged in some sales this year. Last month, it announced the sale of the intellectual property rights<\/a> associated with the World Series of Poker (WSOP) to investment firm NSUS Group Inc. for $500 million. That results in an immediate influx of $250 million in cash, with the remainder coming in five years.<\/p>\n

Combine that with $250 million in capital spending coming off Caesars\u2019 books and the casino giant\u2019s financial position is steadily improving.<\/p>\n

Caesars Could Embrace Buybacks<\/h2>\n

Bain estimates that by the end of next year, Caesars\u2019 net debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio should be below 3.5x with lease-adjusted debt below 5x. Should those objectives be reached, it could give the Harrah\u2019s operator the flexibility to repurchase its stock.<\/p>\n

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Given the above and an enterprise value\/EBITDA valuation of 6.3x (versus ~10.4x at the time of the Eldorado\/CZR merger in 2020), we believe CZR is in a position to begin to repurchase shares, though we still expect a vast majority of incoming cash will be used to repay debt,\u201d concluded\u00a0 Bain.<\/p>\n<\/blockquote>\n

The gaming company has $141 million remaining on a previously announced buyback program.<\/p>\n

The post Caesars Set for Lower Rate Perks, Could Sell Linq Promenade, Says Analyst<\/a> appeared first on Casino.org<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

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