NEW YORK (TheStreet) --Shares of Caesars Entertainment Corp. (CZR) are lower by 10.63% to $13.28 in mid-morning trading on Friday, as lenders exited talks over the casino operator's restructuring of its largest unit, Caesars Entertainment Operating Co., Bloomberg Businessweek reports.
The lenders also released details of Caesars plan to place the unit into bankruptcy and then convert it into a real estate investment trust.
In a statement dated December 11, the creditor group, which is being represented by the financial advisor Rothschild Inc. and the law firm Stroock & Stroock & Lavan LLP, said talks ended on December 10 when a non-disclosure agreement facilitating the negotiations expired, Businessweek added.
Now that the debt holders' negotiations have ended, Caesars must decide if it wants to continue with its plans to file the unit for bankruptcy in January without their support, Businessweek noted.
Having disclosed what was material non-public information, lenders would be allowed to trade Caesars' debt again, according to Businessweek.
The documents the lenders released said the Caesars' plan to turn the unit into an REIT with a landlord unit would carry leverage of almost 10 times debt to earnings, and a management unit carrying leverage of 5.5 times. Together the units would have $8.6 billion in debt, Businessweek said.
Separately, TheStreet Ratings team rates CAESARS ENTERTAINMENT CORP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate CAESARS ENTERTAINMENT CORP (CZR) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income has decreased by 19.3% when compared to the same quarter one year ago, dropping from -$761.40 million to -$908.10 million.
- Net operating cash flow has significantly decreased to -$87.20 million or 288.33% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, CZR has underperformed the S&P 500 Index, declining 20.81% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- CAESARS ENTERTAINMENT CORP's earnings per share declined by 7.6% in the most recent quarter compared to the same quarter a year ago. The company has reported a trend of declining earnings per share over the past two years. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, CAESARS ENTERTAINMENT CORP reported poor results of -$21.43 versus -$11.12 in the prior year. This year, the market expects an improvement in earnings (-$14.59 versus -$21.43).
- The gross profit margin for CAESARS ENTERTAINMENT CORP is rather high; currently it is at 50.32%. Regardless of CZR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CZR's net profit margin of -41.04% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: CZR Ratings Report