Cosmo - a perfect fit for CEC?
Started by jimmybond on Thursday, 5th September 2013 6:29 pm
(The VT boards have been active of late so thought I'd throw this one out there too!)
Following on the Cosmo and Flamingo threads of late, any thoughts on Caesars group adding Cosmopolitan to their collection by buying it off DB? Would give them a high end 'trendy' product to compete with MGM (bellagio = caesars, CEC_owned Cosmo = Aria) Sure, CEC has $20+B in debt, but what's another $500-1B on top of that? It's like a rounding error. They can probably get it for a discount these days given all the red ink Cosmo is bleeding anyhow. And cosmo would be instantly networked into the Total Rewards data gold mine which could drive more casino traffic.
Deutsche Bank already has a research coverage relationship with CEC - judging it a 'hold', but no doubt the DB investment bankers would be salivating to do something with CEC and move that Cosmo weight off their books while making some fees in the meantime (4-7% on a $1B deal is tasty). Debt is cheap right now anyhow.
Last response by MizzouGypsy 27th September 6:30pm
yourstarla responded on Thursday, 5th September 2013
Couldn't get any worse. At least they'd have a better relationship with casino clients.
Blakjackkid responded on Friday, 6th September 2013
Personally, I'd think it'd be a better fit for MGM since Cosmo is located in the City Center complex but just like CEC, they also have more debt than they want imo. About 3 years ago a bartender at the Cosmo mentioned to me that the rumor was Elaine Wynn was interested in buying it for $1B but nothing came of it obviously. I know Ruffin badly wants another joint on the Strip but whether he could come up with what DB would want for the Cosmo is another thing, I'm sure he would still prefer to get his hands on the Mirage.
lewintn responded on Friday, 6th September 2013
Thoughts? Yes, I think, as a Cosmo fan, that it is a (expletive deleted) nightmare scenario. To give the unique gem that is The Cosmopolitan Las Vegas to that shabby company would be a travesty. Can you imagine what the company responsible for the current sewage and mold covered Flamingo would do to this place? Even their "flagship" property is hardly keeping up standards that could be considered palatial by any means. The prices for CP are premium, but would it even be considered in the top 5 nicest properties on the Strip?
No, please please no. If one of the "Big Deuces" have to buy it, I hope it is MGM. At least they seem to have enough money for remodels and new paint. Personally, I like that it is independent and hope any new owner is independent as well.
Malibugolfer responded on Friday, 6th September 2013
I can imagine DB's reaction if Apollo and TPG sent Loveman over to make a deal. Just like when George Costanza told Susan he wanted a pre-nup and she laughed in his face..."you don't have any money"
I wonder what the CZR bond holders' lawyers would say when CZR declares Chap 11?
vespajet responded on Friday, 6th September 2013
While Cosmo has denied the rumors of the property being sold to James Packer/Crown Limited, when DB finally sells off the resort, it will likely be to someone like them or maybe Genting. Crown owns a stake in Cannery Casinos and lost a boatload of money (Well over $750 million) investing in the Fontainebleau Las Vegas, Station Casinos and Harrah's Entertainment in addition to their canceled Crown Las Vegas resort originally slated for the former Wet-N-Wild site.
Perhaps Crown picks up Cosmo and Revel....
blackjacker1979 replied on Sunday, 8th September 2013
No one is going to pick up either at this point. The numbers they are putting out are just too poor to attract anyone serious about gaming. Even in the case of Penn and the M, they picked up the property because it was performing excellently outside of the gaming side, and gaming was actually profitable.
Ideally I think the best thing to happen to both at this point is some cross branding. Perhaps the two enter into an agreement wherein they share client base and offer cross promotions. Might be a good way to brand themselves into something profitable in the long run, rather than waiting to be bailed out.
blakjak21 responded on Friday, 6th September 2013
Crown snapping up Cosmo and Revel...........that would be the right amount of wrong.
HedgedBettor responded on Saturday, 7th September 2013
In a world of practical financial reality, this can't happen. Its not a "whats another 500-1B" situation - you have to find somebody willing to lend you the money, and nobody will lend to Caesars when the credit is rated CCC- and the company is essentially bankrupt. All that's going on at Caesars right now from an ownership perspective is an attempt by the equity holders to use their right to operate the business to salvage value to equity at expense of the creditors. Deutsche Bank has nothing to gain by getting itself involved in that shitshow.
Even if you set aside the practical element, I don't think it fits. How does Cosmo work in the Total Rewards system? No synergy with their core customer. Wynn or MGM should be the long run owner of the property to me. Alternatively, a third party should buy the place and buy the Harmon land package from MGM (you'd think Citycenter LLC would gladly sell given MGM's debt position doesnt encourage them to hold non-cash-flow-generating assets when they could be monetized, and the fact that Dubai is in retreat mode from its pre-bubble splurges and the Abu Dhabi bailout) in order to expand Cosmo's casino floor and room options. If you could have a twin property you could get closer to the critical mass needed to run the property efficiently outside of one of the big strip conglomerate players.
HedgedBettor replied on Saturday, 7th September 2013
There's one other thing going on at Caesars financially, as a postscript - TPG and Apollo (the latter being the driving force here, since they are one of the most sophisticated investors in the distressed debt market) are buying up critical tranches of the Caesars capital structure in order to keep control when a prepack is filed. I'm making some only barely educated guesses here, but I assume that when the prepack happens the CMBS secured by the PropCo properties (that essentially being the land under the various casinos other than the ones in the area of the Linq) will remain outstanding, the senior tranches (that TPG/Apollo have bought up) will be converted to equity, the junior stuff will get a haircut and be exchanged for new debt. The alternative is that TPG/Apollo could just try to negotiate debt for equity swaps on the senior credit and avoid the technical process of filing in bankruptcy court, even with a prepackaged settlement. But pretty clearly they don't intend to give up the reins at Caesars