Caesars casinos have clearly been struggling for the last few years. Owners at Caesars Entertainment Corporation have realigned their assets on several occasions to keep the company from going under. But now, with $11.4 billion worth of lawsuits aimed their way, stocks plunged 16% on Monday, and the threat of bankruptcy is very real.
In January 2015, the operating unit of Caesars Entertainment filed for Chapter 11 bankruptcy protection after falling into $18 billion worth of debt. Needless to say, bondholders were irate, attempting to file litigation against the company.
But in February 2016, Caesars was temporarily saved by Chicago’s U.S. Bankruptcy Judge Benjamin Goldgar, who ordered a stay of litigation, effectively preventing bondholders from suing the company, at least for the time being.
The judge was acquiesce to the casino operating group’s promise that it’s parent company would provide a multi-billion dollar contribution towards a reorganization plan meant to – in theory – save Caesars casinos, hotels and other resort facilities from going under.
However, on Friday, when it was revealed that the company failed to make good on that promise, and things took an ugly turn for Caesars. During a hearing in which the company requested another extension, Judge Goldgar refused. He lifted the stay of litigation, giving plaintiffs the go ahead to file over $11 billion in lawsuits against Caesars.
Attorneys for the casino corporation urged the judge to reconsider, claiming Caesars Entertainment Corp could be forced into bankruptcy, right alongside its operating unit, if bondholders were allowed to proceed with the multi-billion dollar lawsuits.
That clearly wasn’t enough to assuage the judge, whose gavel struck swiftly, solidifying the decision.
Caesars Entertainment Corp immediately filed an appeal following the judge’s ruling on Friday. The stay of litigation expired on Monday, clearing the way for a potential ruling against Caesars on Tuesday in New York.
CZR Stocks Plummet 16% Monday
Caesars casinos are represented on the NASDAQ under the ticker CZR, and for investors, it’s hard to take their eyes off it. Following Friday’s decision, Caesars Entertainment stock took a dramatic dive, falling 16% from $7.49 at Friday’s close, to $5.62 at Monday’s opening. Shares have recovered slightly since then, listed at $6.39 as of 10:30 a.m. ET today.
About Caesars Entertainment
Originally founded in 1937 under the name Harrah’s Inc. (then Harrah’s Entertainment in 1995), the company rebranded itself as Caesars Entertainment in 2010. Headquartered in Paradise, Nevada, there are now more than 50 Caesars casinos and hotels, as well as over half a dozen luxury golf courses, all over the world. The casinos operate under the company’s multiple brands, including Bally’s, Caesars, Harrah’s, and more recently, Horseshoe.
In 2004, the company made an enormous acquisition, purchasing Binion’s Horseshoe, along with rights to the Horseshoe name, as well as the World Series of Poker (WSOP). The casino hotel was sold to MTR Gaming the following year, while the WSOP was moved to Caesars-owned Rio All Suite Hotel and Casino in Las Vegas, where it’s been held every year since.
In 2013, Caesars dipped its hands into the online gambling industry by launching several licensed and regulated iGaming websites, including WSOP.com in Nevada and New Jersey.
That endeavor, combined with aggressive acquisitions and – some would say – mismanagement of funds, caused Caesars debt to trek a steady incline, resulting in the operating unit’s declaration of Chapter 11 last year.