Ceasar’s Distributes Subscription Rights For ‘Good Asset’ Spinco

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Ceasar’s Entertainment (CZR) distributed subscription rights to its shareholders two weeks ago, offering them the option to purchase shares of Ceasar’s Acquisition Company at the price of $8.64 per share. The rights were distributed on October 21st to shareholders as of October 17th and shareholders should have received one subscription right for every CZR share owned. As we explained earlier, the ‘spinoff’ is a transparent attempt to shield ‘good assets’ from creditors as Ceasar’s continues to struggle with a heavy debt load. The new company will own Ceasars Interactive Entertainment, Las Vegas’ Planet Hollywood Resort & Casino, Ceasar’s JV in the Horseshoe Baltimore along with a stake in the management fee stream from both properties. CZR will still have a large ownership stake in the new company.

Shareholders who exercise all of their rights can ask for even more shares of the Newco if the offering is under-subscribed. While there is no guarantee of that happening, I think there is a good chance some shareholders let this offer expire. As a result, it’s very possible that Ceasar’s private equity investors will be able to increase their stake in the ‘good asset’ company.

The subscription offering expires at the end of the day on November 2nd and the rights are not saleable, transferable or listed on any exchange. That means if you didn’t own CZR on the record date and are interested in the new company, you will need to wait for it to list before purchasing. The upside to that is that you won’t be stuck with any over-leveraged CZR shares as well. The new company is expected to be listed on the NASDAQ on November 18th under the ticker ‘CGP’.

Disclosure: Author holds no position in any stock mentioned.

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