4:00 PM New York - Caesars Entertainment priced its public offering at $9 a share and the stock quickly shot up above $17 before settling near $15. The debt heavy casino with no operations in Macau, China is struggling to revive its revenues in the last four years.
Caesars Entertainment Corp surged in volatile trading in New York after it priced a significantly smaller offering than its previous attempt more than a year ago.
The casino operator priced 1.8 million shares at the mid-point of the offer price range between $8 and $10 a share and trades with the symbol CZR.
The Las Vegas headquartered company owns, operates and manages 52 casinos in the U.S. and U.K.
The current offering price valued the money losing and debt heavy casino at $1.14 billion. Stock rose sharply after it opened near its $9 price and shot up to $17.90 that valued the casino operator at $2.24 billion.
The offering of 1.7 million shares raised $16.3 million before fees and expenses. Caesars first filed to go public in October 2010 to raise as much as $575 million and then lowered it to $530 million before cancelling the entire offering in November 2010.
The company was then known as Harrah’s Entertainment Inc.
In 2007, Harrah’s Entertainment was taken private in a leveraged buyout that valued the casino at $17.1 billion with $12.4 billion in debt. The debt on the balance sheet has shot up since then to $22 billion. The expensive acquisition at the height of the housing and leverage buyout bubble loaded up the company with lots of debt and nearly destroyed the company’s capital structure.
Apollo Management and Texas Pacific Group took the Harrah’s private at the height of the market and when the economy was roaring and housing market was inflated, and the casino has struggled since then.
The small offering also paves the way for more stocks to be sold by other investors in the company and sell as many as 34.7 million shares after the offering according to the prospectus.
The hedge fund manager Paulson & Co. run by John Paulson has the right to sell most of its stake of 9.9% or 12.4 million shares. Other investors including Goldman Sachs and Deutsche Bank AG have the right to sell 22.3 million shares.
Apollo and TPG have not filed to sell shares in the current public offering and are not in the group of investors who are looking to sell shares in the next six months.
The offering will create liquidity in the stock and the company plans to use proceeds for general purpose and maintenance. Credit Suisse Group AG and Citigroup Inc are the lead underwriters.
Valuations of the company are not cheap. Caesars has significant exposure to Atlantic City casinos and revenues in the nine months to September were flat at $6.7 billion. The company operates no casino in Macau, China where the industry revenues in 2011 surged 42%.
Las Vegas casino industry revenues in the period rose 6.5% according to the industry’s association.
Caesars has struggled with the faltering economy in the last four years. The average daily revenue across the company hotels in 2007 was $111 and that has declined to $91 in the nine month ending in September 2011.
The company’s heavy debt load will weigh heavily against the share price as the interest payment on the debt is nearly three times its operating income.