Eldorado Closer to Caesars Finish Line as Banks Prep Critical $7.2 Billion Bond Offering

Posted on: June 17, 2020, 09:56h. 

Last updated on: June 17, 2020, 11:05h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

In a move critical to sealing Eldorado Resorts Inc.’s $17.3 billion takeover of Caesars Entertainment (NASDAQ:CZR), the regional gaming company announced a massive corporate debt sale. That’s while a syndicate of banks is preparing to move those bonds as market conditions improve.

Eldorado Bond Sale Prepped
Banks are prepping a bond sale essential to Eldorado’s plan to acquire Caesars for $17.3 billion. (Image: Reuters)

Reno-based Eldorado said earlier today it’s selling $6 billion worth of debt – $3.08 billion in senior secured notes coming due in 2025, $1.875 billion of senior notes maturing in 2027, and a $1.05 billion placement of senior secured notes with a 2025 maturity.

The offerings of the Notes are part of the financing for the proposed acquisition by Eldorado of all of the issued and outstanding equity interests of Caesars Entertainment Corporation,” said ERI in a statement.

A consortium of banks, led by JPMorgan Chase & Co. and Credit Suisse, are readying a $7.2 billion bond sale that includes a mix of ERI and Caesars obligations. That’s essential to bringing the $17.3 billion acquisition across the finish line.

The high-yield bond and leveraged loan markets all but froze in March as the coronavirus pandemic gripped riskier assets, stoking speculation that the banks would encounter difficulty in finding willing buyers for the ERI/Caesars paper.

Improving Market Conditions Matter

Up more than 75 percent over the past month, Eldorado stock surged more than seven-fold off its March lows. It’s a move renewing investors’ faith in completing the Caesars marriage while rejuvenating appetite in the bond market for the acquirer’s debt.

The high-yield corporate bond market recouped nearly all of its losses notched earlier this year, while leveraged loans – obligations included in the ERI/Caesars debt mix, are back to 90 cents on the dollar, according to Bloomberg data.

Leveraged loans are typically extended to companies with poor credit ratings and high debt burdens, with lenders viewing the instruments as risky because of elevated default risk. The banks shopping the gaming companies’ offering recently negotiated a clause where they can shift some of the leveraged debt to senior secured bonds, reports Bloomberg. In the event of default, secured bond holders would be compensated before leveraged loan investors.

Previously, Eldorado hoped to wrap up the acquisition creating the largest domestic gaming enterprise by the end of this month. But recent filings indicate the time frame is now the middle of 2020.

Busy Week of Financing

The bond sale news is the latest in what’s become an active stretch of capital-raising by Eldorado. On Monday, the company announced the sale of 18 million shares and two deals with VICI Properties (NYSE:VICI).

After the close of US markets Tuesday, it was revealed the equity sale netted ERI $672 million in proceeds. Underwriters have a month in which they can buy another 2.7 million shares.

In the transactions with VICI, ERI raised $503.5 million. That was arrived at via a mortgage agreement worth $400 million on the Caesars Forum Convention Center at Caesars Palace in Las Vegas and the sale of 23 acres of unused land on the Strip for $103.5 million.