Fitch recommends WSOP spin-off for Caesars

US ratings agency Fitch has suggested Caesars spin-off its Interactive arm, including the prized World Series of Poker brand, so it can continue to meet its debt obligations.

Downgrading its rating outlook for the company to “negative from stable” the bond ratings service suggested Caesars could seek Chapter 11 bankruptcy protection to restructure its US$20bn debt, or among other options, spin off or otherwise monetise its digital arm “to extract value out of Interactive and not risk the entity being pulled into the restructuring proceedings.”

Fitch said it “believes that most of Caesars’ current equity value is attributable to this unit, which would benefit materially if online gaming is legalized on the federal level in the US.”

Caesars Interactive Entertainment (CIE), headed by former PartyGaming chief Mitch Garbe (pictured), owns the Word Series of Poker brand, Facebook gaming business Playtika and operates real-money WSOP-branded poker websites in the UK and France and Caesars-branded casino and bingo sites in the UK. 888 and Gamesys are Caesars’ software partners in the UK, with Barriere Poker powering its site as part of a deal with its land-based casino parent company to host the World Series of Poker Europe.  It also has a deal with the owner of Italy’s largest poker network, Microgame, to run WSOP-branded tournaments and qualifiers across its People’s Poker Network.

In April, Caesars sold an undisclosed percentage of CIE to Rock Gaming, its joint venture partner in two Ohio bricks ‘n’ mortar casinos, for US$60.8m.

Caesars has close to US$20bn in long-term debt, the highest in the US casino industry. Fitch told investors the casino operator may need to obtain a covenant amendment or waiver by late 2013 or early 2014, given the company’s “near-to-medium term cash burn rate.”

Bank of America downgraded its outlook on Caesars in July, with Standard & Poors following suit last month.

Casino Choice journalist

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