Analyst: $772 million from stock sale strengthens Eldorado’s liquidity Howard Stutz, CDC Gaming Reports · June 19, 2020 at 7:34 am Eldorado Resorts will secure $772 million from a stock sale after the deal’s underwriters exercised an option to acquire 2.7 million shares, the regional casino operator said Thursday. Coupled with the $503.5 million that Reno-based Eldorado will see from two deals with VICI Properties, one gaming analyst said he remained bullish about the company’s future prospects as its completion of the $17.3 billion acquisition moves into July. Eldorado also announced a debt raise this week of $3.08 billion to help finance the Caesars transaction. The company is selling debt of $1.875 billion due in 2027 and $1.05 billion due in 2025. “We believe the transactions further the liquidity circumstances for the pro forma entity, ahead of the debt financing transactions,” Deutsche Bank gaming analyst Carlo Santarelli said in a research note. The analyst noted there is no change in Eldorado’s future despite the closure of the nation’s casino industry in mid-March due to the coronavirus pandemic. Eldorado will have 21 of its 23 properties reopened by Friday, while Santarelli believes Caesars’ reopened casinos on the Las Vegas Strip are “outperforming” those of its peers. Meanwhile, Eldorado is now forecasting $800 million in cost savings for the transaction, which includes $400 million in previously discussed savings and an additional $400 million in cost savings related to COVID-19. The Eldorado-Caesars merger was announced on June 24, 2019. Eldorado is the acquiring company; its management will control the merged operation out of its corporate offices in Reno. Current Eldorado CEO Tom Reeg will be CEO of the combined company. Combined, the new company, which will retain the Caesars name, will have roughly 60 properties in 16 states. Indiana – one of three states that have not approved the transaction – said Wednesday that its gaming commission will take up the merger on July 10. Gaming regulators in Nevada and New Jersey also have yet to sign off on the transaction, which is awaiting Federal Trade Commission approval. Eldorado and Caesars have deals in place to sell casinos in several gaming markets – including Nevada, Louisiana, Mississippi, and Missouri – that would seemingly alleviate any potential antitrust issues. Santarelli, in his research note, expected the merged company to have roughly $2.7 billion in liquidity once the transaction closes. He said the sources for liquidity include a $210 million increase in the company’s borrowing revolver, $400 million for the five-year mortgage it took out with real estate investment trust VICI Properties for the 500,000 square-foot Caesars Forum on the Strip, and $103.5 million in cash for the sale of 23 acres of undeveloped Strip land to VICI. Eldorado also announced in April that it would sell Eldorado Shreveport in Louisiana and the operations of MontBleu Resort Casino in Lake Tahoe, Nevada to Twin River Worldwide Holdings for a combined $155 million. In total, the deals amount to roughly $870 million in additional liquidity. Eldorado has another deal in place to sell Isle of Capri Kansas City in Missouri and Lady Luck Vicksburg in Mississippi for $230 million, also to Twin River, which clears up further antitrust matters. Twin River is also buying Bally’s Atlantic City from Caesars and VICI for $25 million. Post-merger, Eldorado will control three Atlantic City properties: Tropicana, Caesars, and Harrah’s. Meanwhile, Eldorado is expected to sell two of the five casinos the company will control in Indiana, which Santarelli estimated could raise up to $900 million in additional cash. The company is, furthermore, expected to sell up to two of the former Caesars Strip resorts. “Net-net, we believe Eldorado clearly outlined what is a fairly lengthy list of potential monetization opportunities should it wish to accelerate its deleverage plans and or look to further fortify liquidity,” Santarelli wrote. Eldorado, which is expected to finalize the stock sale Friday, said it would use the funds for general corporate purposes. Shares of Eldorado closed Thursday on the Nasdaq at $40.77, down $2.36 or 5.47%. Caesars closed at $12.12 on the Nasdaq, down 20 cents or 1.62%. Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at firstname.lastname@example.org. Follow @howardstutz on Twitter.