Why did Caesars Casino Bankruptcy Happen, and how did it Rise Again?
In January 2015, Caesars Casino Entertainment Corporation filed for Chapter 11 bankruptcy protection. But how did the company get to this point?
When Caesars Casino filed for Chapter 11 bankruptcy protection in January 2015, most gamblers received the news with shock. After all, Caesars Casino had been one of the doyens of the Vegas gambling scene.
The story behind Caesars Casino’s bankruptcy is complex and a textbook example of how a seemingly successful company can go so wrong, so quickly.
History of Hilton Hotels and Casino
The original Caesars Casino was once part of Conrad Hilton’s well-known Hilton Hotels Group. Hilton bought his first hotel in 1919. However, with the development of the Caribe Hilton Casino and Hotel in Puerto Rico, the first traces of future Caesars Casino began.
Following the success of Caribe Hilton, other casinos and hotels were built around the Caribbean. In 1970, Hilton obtained a majority share of Kirk Kerkorian’s Flamingo and International Hotels, making casino hotels half of Hilton’s total revenue.
By 1996, the Hilton holding company had a vision of becoming the United States gaming industry leader. The company took a step toward this goal when it acquired Bally’s Entertainment, a pillar of the Atlantic City casino landscape with five venues throughout the country. This was a strategic move to penetrate the competitive gambling market of Atlantic City, which drew in the wealthy gamblers from New York City.
In 1998, Hilton would split its gambling and hotel businesses by creating Park Place Entertainment to oversee all its interests in the gambling industry. Park Place Entertainment purchased Caesars World in 2000.
History of Caesars Casino
By the time of its addition to the Hilton empire, Caesars had been around for more than 30 years. The legendary Caesars Palace opened its doors in 1966, based on an ancient-Roman-inspired idea of Jay Sarno. It was purchased by Lum’s restaurant group three years later. Eventually, the company disinvested from its restaurant assets and took the name of Caesars World, concentrating solely on the gaming industry.
Over the next three decades, Caesars World added seven more hotels and casinos to its portfolio before its paths crossed with Park Place Entertainment – a company that had the financial power to grow Caesars’ reach even further.
By the time of its change of ownership in 2000, Caesars had established itself in the gambling market. Park Place Entertainment chose to capitalise on brand recognition by changing the company name to Caesars Entertainment in 2003. However, it wasn’t long before the newly formed company was purchased by Harrah’s Entertainment, by which time Caesars had earned the recognition as a luxury stop for high rollers. By all appearances, the company seemed to have a bright future.
Unfortunately, in the middle of these transactions, the 2008 recession happened. The company, indebted at the time, was purchased by TPG Capital and Apollo Global Management in January 2008. The two equity firms took on significant debt to conduct the purchase in the first place, plus they acquired Caesars’ existing debt as well.
As we know, 2008 was the worst time to hope for an uptick in investment. The company accrued losses for five straight years through to 2014. These debts and liabilities came to a head with Caesars Casino Entertainment filing for Chapter 11 bankruptcy protection on 15 January 2015.
Future of Caesars Casino
By filing Chapter 11, Caesars Casino avoided forced bankruptcy. While the company had to cut some losses and become leaner, it remained one of the largest gambling conglomerates. Due to the protection from creditors, the doors remained open for Caesars, as it emerged from its financial crisis as a successful operation once again.
Whatever the lesson, we can hope that other players in the gambling industry who experience the same financial issues as Caesars can successfully come out of the situation poised for a more prosperous future.