Shares of Caesars Entertainment sank today on the news that CFO Jonathan Halkyard has quit, taking an equivalent position at NV Energy. Although the latter’s financial outlook is far rosier, with scant long-term debt, its revenue base ($611 million last quarter) is a fraction of Caesars’, making it difficult to characterize Halkyard’s leap as even a lateral move. But perhaps he got tired of staving off disaster at Caesars, where debt outnumbers cash flow 9.5 to 1. The company’s survival hinges upon opening as many new markets as possible before the jaws of debt maturity snap shut, even if it means pursuing low-yield projects like a Baltimore casino. Ditto Massachusetts, where Suffolk Downs owner Richard Fields has hung a prohibitive, $1 billion budget on a Caesars racino, jumping off the deep end and dragging Gary Loveman with him.
(Update: Perhaps the pithiest comment on l’affaire Halkyard came from Las Vegas Review-Journal reader “Long Time Nevadan” who wrote: “[NV Energy’s current CFO] makes about $862,000 plus benefits. Mr. Halkyard should be at least matching that number. Beauty about his new job is that his new business has a captive audience. No need to worry about weak demand for hotel rooms or declines in gaming wins. In this new job, the customers aren’t going anywhere.” An obviously miffed Caesars press release offered no congratulations, merely grumbling that Halkyard would “pursue an opportunity outside of the gaming industry.”)
Loveman will be a little busier now, having to add the CFO portfolio to his roster of titles as CEO, chairman of the board, president and Holy Roman Emperor. The Loveman/Halkyard combination always seemed redundant: Two number-crunchers calling the shots and nobody providing ‘the vision thing.’
Meanwhile, Caesars is scampering madly toward Toronto brandishing a billion dollars in phantom money, desperate to keep pace with MGM Resorts International‘s better-organized (if equally dubious) metaresort pitch. This steeplechase looks downright insane when you consider how poorly Caesars’ attempted yard sale of surplus assets is going. Instead of thinning out duplicative assets during and after the LBO, Loveman elected to double, triple, even quadruple down and now he’s trying to peddle low-hanging fruit in a buyer’s market. But when Tilman Fertitta expanded into Atlantic City and Biloxi, and Boyd Gaming went to Iowa and Biloxi as well, they bypassed Caesars assets in favor of arguably lesser properties.
Besides, no matter what market Caesars is in, most of its major competitors are already present, which takes a lot of potential buyers off the table. When former CEO Phil Satre and, later, Loveman were gobbling up smaller companies in a sustained frenzy of consolidation (which climaxed with Caesars eating itself), they unwittingly ensured that there would be far fewer players at the table if they ever had or wanted to divest properties. How badly did then-Harrah’s Entertainment really need the Harvey’s and Showboat brands?
Which brings us to the sad plight of Grand Casino Biloxi, partially demolished after Hurricane Katrina, and its never-to-be-built Margaritaville successor. In the quintessential instance of Loveman’s addle-pated concept of “strategy,” he was simultaneously attempting a nearly $31 billion LBO and promising the Gulf Coast between $700 million and $1 billion in spending, two goals that would be mutually exclusive to anyone with a grain of common sense.
Now, Caesars has belatedly come to the conclusion that “the market wouldn’t support the investment” and written off all the construction costs. In a costly swap with Pinnacle Entertainment, Loveman forfeited Caesars’ Lake Charles, Louisiana, beachead for … an empty cement slab. CEOs have been pink-slipped for decisions far less stupid than that. The City of Biloxi has given Caesars an ultimatum to either tear up or repair (highly unlikely) the vacant hulk, though the May 15 deadline came and went without resolution. It sounds as though Caesars is trying to find someone to pay to do the dirty work for them — and forget about capex reinvestment in Grand Biloxi while you’re at it.
Facing such depressing scenarios on a daily basis, is it any wonder that Halkyard chose to take a hike?
Rock, MTR, Caesars. Speaking of steeplechases, stampedes and such, an Ohio court has removed the last impediment to racinos in the Buckeye State. Scarcely had Rock Gaming Caesars and Penn National Gaming opened their Cleveland and Toledo casinos respectively, but already MTR Gaming‘s Scioto Downs is poised to plug in its VLTs — the first of thousands — tomorrow. Further behind in the pack are Pinnacle and Hard Rock International, while Caesars and Penn are angling for state approval to move their three parimutuels, in order to be more competitive, among other reasons.
The casino operators have two things going for them, though. The racinos will be Class II facilities and they’ll be in the racino biz themselves, thereby protecting their market share. Neither company is in position to complain, having acceded to this (along with higher taxes) in a shameful surrender to Gov. John Kasich‘s extortionate policies. The other villain in the scenario is anti-gambling group Ohio Roundtable, which may try to get its racino litigation reinstated and just maybe get the casino-enabling legislation tossed, too, which would be a costly and deplorable setback.
Wayne’s World II: In a Pyhrric victory for Wayne F. Newton, he managed not only to avoid being evicted from his own home but got a restraining order against property owner Steve Kennedy. Wow, that’s some juice, Newton! This puts the kibosh on the Wayner’s attempt to convert his home into a museum, although skeptics will argue that this was never in the cards and the whole thing was a big tax dodge. If that’s the case, Newton sure went through a lot of byzantine and counterproductive trouble to avoid a tax bill.
