Approximately $12.0 billion of rated debt affected.
New York, March 01, 2011 -- Moody's Investors Service today upgraded Caesars Entertainment Corporation's
("CET") Corporate Family ratings and Probability of Default ratings to
Caa2. Moody's upgraded Caesars Entertainment Operating Company's
("CEOC"), a direct wholly subsidiary of CET, senior
secured first lien ratings to B3, second lien ratings to Caa3 and
affirmed the senior unsecured ratings at Ca. Moody's assigned
a B3 rating to the proposed $400 million senior secured loan to
a wholly owned subsidiary ("Newco") of CEOC. The loan
will be used to finance completion of the Octavius Tower in Las Vegas,
and development of a retail, dining and entertainment corridor ("Project
Linq") located between the Imperial Palace Hotel & Casino and
the Flamingo Las Vegas on the Las Vegas strip. The loan will be
secured by Octavius Tower and Project Linq and CET will provide a completion
and performance guaranty.
The upgrade of CET's Corporate Family Rating reflects Moody's
expectation that EBITDA will rise moderately in 2011 given signs of modest
improvement in demand trends across the majority of markets in which CET
operates. The upgrade also reflects CET's good liquidity
profile and the absence of any material debt maturities until 2014,
said Peggy Holloway, senior analyst at Moody's. Moody's
upgraded CET's Speculative Grade Liquidity rating to SGL-2
from SGL-3 reflecting our view that EBITDA will begin to stabilize
and that CET has sufficient cash on hand and revolver ability to manage
it cash needs over the next several years.
RATINGS RATIONALE
CET's Caa2 Corporate Family Ratings reflect very high leverage,
weak interest coverage, the company's debt financed growth strategy,
and our view that the company's current capital structure in unsustainable
in the long-term. The ratings reflect our expectation that
gaming demand will rebound very slowly over the next several years.
However, in the absence of a material de-leveraging transaction,
we do not expect the company's capital structure to improve materially
over the next few years. Additionally, given CEC's
weak credit profile, there is a possibility that the company could
again pursue transactions that will result in impairment of debt holder
claims as a means to improve its capital structure.
Ratings assigned:
Newco - Octavius Borrower
$400 million senior secured 6 year term loan at B3 (LGD 3,
30%)
Ratings upgraded:
Caesars Entertainment Corporation
Corporate Family Rating to Caa2 from Caa3
Probability of Default Rating to Caa2 from Caa3
Speculative Grade Liquidity rating to SGL-2 from SGL-3
Caesars Entertainment Operating Company, Inc. (CEOC)
Ratings Upgraded:
Senior secured guaranteed revolving credit facility to B3 (LGD 3,
30%) from Caa1 (LGD 2, 26%)
Senior secured guaranteed term loans to B3 (LGD 3, 30%) from
Caa1 (LGD 2, 26%)
Senior secured notes to B3 (LGD 3, 30%) from Caa1 (LGD 2,
26%)
Harrah's Operating Escrow LLC and Harrah's Escrow Corporation assumed
by CEOC
Senior secured notes to B3 (LGD 3, 30%) from Caa1 (LGD 2,
26%)
Senior secured second priority notes to Caa3 (LGD 5, 80%)
from Ca (LGD 5, 74%)
Ratings affirmed and assessments updated where applicable:
Caesars Entertainment Operating Company, Inc.
Senior unsecured guaranteed by operating subsidiaries and CEC at Ca (LGD
6, 93%) from Ca (LGD 5, 88%)
Senior unsecured debt guaranteed by CET at Ca (LGD 6, 95%)
from Ca (LGD 6, 93%)
The stable rating outlook reflects the company's solid liquidity
profile and Moody's view that the majority of US gaming markets
in which CET participates will begin a slow recovery in 2011. A
ratings upgrade in the near term is unlikely in the absence of a material
de-leveraging event. In the intermediate term ratings could
be upgraded if there is a sustained improvement in operating trends,
a material improvement in credit metrics, and a better longer term
liquidity profile. The rating outlook could revert to negative
if earnings begin to decline, liquidity deteriorates, or if
for any other reason the probability of default increases.
The principal methodologies used in this rating were Global Gaming published
in December 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
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
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Peggy Holloway
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's upgraded Caesars' CFR to Caa2, assigns B3 to proposed term loan; outlook stable