The coronavirus pandemic and its impact on the travel, gaming, and hospitality industries has delayed the $17.3 billion merger of casino operators Caesars Entertainment Corp. and Eldorado Resorts and it is now due to close in June.
A source with firsthand knowledge of the matter told CNBC that the deal is definitely moving forward, despite reports from recent weeks that the unfolding global Covid-19 crisis could derail the mega-merger.
The transaction needs approval from gaming regulators in states where Caesars and Eldorado operate properties.
However, the coronavirus stormed through the US casino and hospitality sectors in an unprecedented manner, grinding commercial casino operations to a halt and forcing regulatory bodies to put the $17.3 billion merger on the back burner.
Reports emerged over the past several weeks that the coronavirus crisis could change the way regulators view the massive debt that goes along with the Caesars-Eldorado combination and eventually derail the deal.
Caesars and Eldorado await approval from Indiana, Nevada, and New Jersey regulators. The Federal Trade Commission also needs to sign off on the merger.
Nevada Still Investigating
Nevada Gaming Control Board Chair Tony Alamo said that the regulator is still investigating the deal and that it “is going like any other merger […] it’s just going through the process, which includes a normal investigation.”
Caesars and Eldorado previously expected to close the deal by mid-April, but according to multiple sources, this is now likely to happen in June.
The Nevada Gaming Control Board’s next meeting is scheduled to take place in April. In New Jersey, the state Casino Control Commission is likely to hold its next meeting on May 13.
Caesars, Eldorado Have Enough Liquidity amid Coronavirus Pandemic
A highly placed source told CNBC that both casino operators have enough liquidity to last for well over a year, even though their properties across North America are currently closed and will remain closed for unspecified time.
According to the source, Caesars currently has $3 billion on its balance sheet. The recent sale of its Rio All-Suite Hotel and Casino property in Las Vegas for $460 million provided the company with additional cash.
If Eldorado closes a $230 million sale of two casinos in Mississippi and Missouri to Twin River Worldwide Holdings in the coming two months, it would head into the Caesars combination with $850 million on hand.
The highly placed CNBC source said that “the deal was constructed with a balance sheet to survive a crisis, with ample liquidity and no debt maturities until 2024.”
In addition, Eldorado and Caesars have secured firm financing commitment from 11 banks and intend to close the deal as it is, because any changes could require a new shareholder vote and a renewed effort at procuring financing.
The two companies’ shareholders approved the combination late last year.
Eldorado is currently paying a ticking fee of $2.3 million a day to Caesars shareholders for failing to close the deal within a nine-month period after it was first announced. A late June closure would raise the merger’s price tag to $17.5 billion.
According to insiders, the ticking fee is considered rather insignificant given the size of the deal and the anticipated benefits both companies would reap.
Some Caesars Properties Start Taking Reservations
On March 17, Nevada Governor Steve Sisolak ordered a statewide 30-day casino shutdown as part of a set of measures imposed to curb the spread of the coronavirus. The dangerous virus is ranging on across the US and the rest of the world, but some Caesars properties in Nevada have begun taking reservations.
The company’s Flamingo Las Vegas property tweeted last night that they are “currently taking reservations for April 17th and beyond, but the situation remains fluid.” The tweet read further that “Caesars Entertainment will monitor the evolving situation and work with our local officials on a confirmed reopening date.”