Eldorado Selling Mississippi, Missouri Casinos to Twin River ‘Credit Positive,’ Says Moody’s

Posted on: July 15, 2019, 05:00h. 

Last updated on: July 15, 2019, 07:56h.

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

Last week’s announcement by Eldorado Resorts, Inc. (NASDAQ:ERI) to sell two casinos to Twin River Worldwide Holdings, Inc. (NYSE:TRWH) for $230 million in cash is a move viewed as “credit positive” by Moody’s Investors Service.

The gaming floor at the Isle of Capri in Missouri, which Eldorado Resorts is selling. (Image: KRCU)

Proceeds from the sale of the Isle of Capri Casino in Kansas City, Mo. and the Lady Luck in Vicksburg, Miss. can be used for general corporate purposes. For Eldorado, that likely means whittling down some of the $17.3 billion the company is expected to shell out to acquire Caesars Entertainment Corp.(NASDAQ:CZR).

The transaction is credit positive for ERI because the company can use the proceeds from the sale for general corporate purposes,including its pending acquisition of Caesars Entertainment Corporation (CEC), which was announced on 24 June 2019, and has a transaction value of about $17.3 billion,” said Moody’s in a note obtained by Casino.org on Sunday evening.

The agency said that sales of the Isle of Capri and Lady Luck are credit positive, but not enough for the research firm to alter its current rating or outlook on Eldorado.

Just days after the regional gaming company formally announced its takeover of Caesars, Moody’s placed Eldorado’s credit rating on review for possible downgrade. Moody’s has a B1 grade on Eldorado debt with a “stable” outlook.

Something’s Better Than Nothing

While $230 million is not much in relation to a $17.3 billion deal, it is the latest sign that Eldorado is making moves to jettison some assets and raise capital to fund the acquisition of Caesars. The stock and cash part of the deal is valued at $8.5 billion.

Prior to announcing the Caesars deal, Eldorado revealed it was selling three casinos, including a pair of Missouri properties, to VICI Properties (NYSE:VICI) and Century Casinos for $385 million. Then on the day the takeover offer was publicized, Eldorado revealed the sale of the real estate assets of Harrah’s New Orleans, Harrah’s Laughlin, and Harrah’s Atlantic City to VICI for $3.2 billion.

Throw in the $230 million transaction with Twin River and Eldorado has raised over $3.8 billion via asset sales in just over a month.

It has also been rumored that the combined Eldorado/Caesars could consider selling a Las Vegas property, a move that would likely attract plenty of bidders.

“ERI was placed on review for downgrade on 26 June 2019,” said Moody’s. “The decision to do so was based on our view that a more comprehensive and detailed understanding of the acquisition of CEC with respect to the legal, economic, operations, and strategic implications of the transaction was needed, and that the acquisition would increase ERI’s already high leverage.”

More Sales Could Help

It is widely expected that Eldorado is looking to trim expenses at Caesars and selling some casinos, particularly in markets where the two companies both have existing operations, is an efficient avenue for lowering expenses. Additional property sales could also give ratings agencies reason to boost the seller’s credit ratings.

“Asset sales made before the closing of ERI’s acquisition of CEC could have a material favorable effect on pro forma and projected leverage at ERI, CEC and/or the pro forma combined entity,” according to Moody’s.

The Twin River deal is expected to close in early 2020 while the Caesars acquisition is forecast to be completed in the first half of next year.