Ohio casino regulators dig into debt woes at Horseshoe Cincinnati operator Caesar's Entertainment

Regulator: Caesar's restructuring too opaque

COLUMBUS -- An Ohio casino regulator questioned the transparency of Caesar’s Entertainment Corp.’s debt restructuring strategies Thursday, prompting the Ohio Casino Control Commission to adjourn to executive session to hear additional detail from the Las Vegas–based company that operates Horseshoe Casino Cincinnati.

“It’s all confusing,” said Martin Hoke, a former Cleveland-area Congressman who was appointed to the regulatory panel in 2011. “It’s so confusing as to raise reasonable questions in the minds of reasonable people that it’s intended to be confusing to create opaqueness rather than clarity.”

Hoke was drilling into the details of a series of recent transactions in which Caesar’s Entertainment Operating Company Inc., or CEOC, sold a 5 percent stake to institutional investors, raising cash that helps the company meet debt obligations through 2015.

Caesar’s also formed a new operating company, Caesar’s Enterprise Services LLC, to provide marketing and Total Rewards services to four different companies that now own Caeasar’s Entertainment gaming properties.

The service company’s formation was announced Wednesday. Company officials said the new entity will be good for CEOC because it previously covered 70 percent of the cost of its Total Rewards and marketing programs. Now, CEOC’s costs will be based on the amount of services it uses.

CEOC is a 20 percent owner and manager of Horseshoe properties in Cincinnati and Cleveland. As WCPO recently reported , the Horseshoe Cincinnati property is altering dealer schedules in a way that eliminates hours and health benefits for some employees.

Rock Ohio Gaming, the 80 percent owner of the Horseshoe properties, told WCPO on May 8 it isn’t worried about Caesar’s debt troubles.

In Thursday’s meeting, company officials assured Ohio regulators its recent changes will have no impact on the way Ohio's casinos operate.

“Really nothing changes from an operational standpoint,” said Susan Carletta, vice president and deputy chief regulator compliance officer for Caesar’s Entertainment. “Our total rewards program will remain at all properties.”

CEOC gained about $1.8 billion in cash from and retired debt due in 2015 in the recent transactions, said Eric Hession, senior vice president of finance for Caesar’s Entertainment Corp.

The company also retired “a big chunk of the ‘16 debt through the new term loan that we’re offering,” Hession told the commission. “So from that standpoint the entity is more stable.”

But Hoke and other commissioners wanted to know what impact the transactions will have on CEOC’s net worth and pretax earnings.

“It’s not like anybody is suggesting there’s a lot more gambling money available in the United States,” said Hoke, “...so I assume you’re going to be looking at expense-side issues and try to figure out how to save money.”

Hessian said he could be more forthcoming in executive session, at which point the panel adjourned. When the public meeting resumed, Caesar’s executives were gone and Hoke declined comment on this way out the door.

“We covered all aspects of Caesar’s financial situation … top to bottom, ” said Matt Schuler, the commission’s executive director. “I don’t believe that the pressures they’re experiencing in Las Vegas translate to the Ohio properties because of the unique partnership we have and their role as a management company.”