Approximately $17 billion of rated debt
New York, February 07, 2012 -- Moody's Investors Service today placed the ratings of Caesars Entertainment
Corporation's ("CET") and Caesars Entertainment Operating Company's ("CEOC"),
collectively Caesars, on review for possible upgrade, including
CET's Caa2 Corporate Family and Caa2 Probability of Default ratings.
Moody's also assigned a B2 rating to the proposed $1.250
billion first lien note offering by Caesars Operating Escrow LLC and Caesars
Escrow Corporation both wholly owned subsidiaries of CEOC. The
rating on the proposed first lien note offering is subject to review of
final terms and conditions.
If certain conditions are met, the proposed first lien notes will
be used: to repay approximately $1.0 billion of the
B1-B3 first lien term loans, revolving loans converted to
term loans, to pay transaction fees, and for general corporate
purposes. These conditions are: completion of the Caesars'
proposed bank amendment; execution and delivery of security documents;
gaming approvals for the new notes and the bank amendment; and assumption
of the obligations under the proposed first lien notes by CEOC.
If these conditions cannot be satisfied or are not satisfied on or prior
to the 90th day following the closing of this offering, the notes
will be subject to mandatory redemption at par plus accrued interest.
RATINGS RATIONALE
The review of Caesars' rating is prompted by the company's
announcement that it has launched an amendment to its existing bank credit
facilities that could result in a relaxation of the company's debt
maturity profile, and Moody's view that stabilizing operating
trends in Las Vegas and some regional gaming markets will give the company's
earnings a boost over the next year. Caesars' Speculative
Grade Liquidity Rating of SGL-2 is expected to remain unchanged
because the amendment impacts the company's longer-term maturity
profile
The review for possible upgrade will focus on the outcome of the amendment
proposal and the soon to be reported year-end operating results.
The bank amendment proposal gives existing lenders a number of options
including: 1) to extend the maturity date of up to $4.0
billion of terms loans to 2018 from 2015; 2) to convert existing
revolver commitments (expiring in 2014) into term loans due 2018 and receive
a repayment of 10% of the converted commitment, and/or 3)
extend revolving credit commitments to 2017 from 2014 and receive a 20%
commitment reduction. Consenting lenders will also receive fees
and higher loan pricing (between 150-175 basis points).
The impact on the company's liquidity profile cannot be fully determined
until the amendment closes. However, there is a reasonable
chance the company will be able to reduce its approximate $10.5
billion of debt maturities in 2015 ($5.0 billion bank term
loans and $5.0 billion CMBS) and extend a portion of its
revolving credit commitment that expires in 2014. The pricing increase
is not expected to have a material impact on interest coverage.
Any potential upgrade will be modest given Caesars' high consolidated
leverage (over 11 times) and weak interest coverage (about 1.1
times).
Ratings assigned:
Caesars Operating Escrow LLC and Caesars Escrow Corporation to be assumed
by Caesars Entertainment Operating Company, Inc.
Proposed $1.25 billion first lien notes due 2020 at B2,
LGD 3, 30%
Ratings placed on review for possible upgrade; LGD assessments are
subject to change:
Caesars Entertainment Corporation
Corporate Family Rating at Caa2
Probability of Default Rating at Caa2
Caesars Entertainment Operating Company, Inc. (CEOC)
Senior secured guaranteed revolving credit facility at B3
Senior secured guaranteed term loans at B3
Senior secured notes at B3
Harrah's Operating Escrow LLC and Harrah's Escrow Corporation assumed
by CEOC
Senior secured notes at B3
Senior secured second priority notes at Caa3
Caesars Entertainment Operating Company, Inc.
Senior unsecured guaranteed by operating subsidiaries and CEC at Ca
Senior unsecured debt guaranteed by CET at Ca
Newco - Octavius Borrower
$450 million senior secured term loan at B3
The principal methodology used in rating Caesars Entertainment Corporation
was the Global Gaming Industry Methodology published in December 2009.
Other methodologies used include Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009. Please see the Credit Policy page
on www.moodys.com for a copy of these methodologies.
Caesars Entertainment Corporation, through its wholly-owned
subsidiary, CEOC, owns or manages approximately 50 casinos.
The company generates consolidated revenues of about $8.8
billion.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. Further information on the EU endorsement status and on the
Moody's office that has issued a particular Credit Rating is available
on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
In addition to the information provided below please find on the ratings
tab of the issuer page at www.moodys.com, for each
of the ratings covered, Moody's disclosures on the lead rating
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ratings.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
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Please see Moody's Rating Symbols and Definitions on the Rating Process
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Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
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Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Peggy Holloway
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's places the ratings of Caesars Entertainment on review for possible upgrade; assigns a B2 rating to the proposed first lien note offering
