Delay in Caesars-Eldorado merger could mean deal totally craps out

Casino regulators are putting the industry’s biggest gaming merger on the back burner due to the coronavirus — raising the odds that the deal could be squashed, The Post has learned.

When casino operator Eldorado, which runs Tropicana and Circus Circus casinos, agreed to buy Caesars Entertainment for $17.3 billion last year, it had planned on closing the deal in late March or early April after winning regulatory approval.

Then the coronavirus hit, forcing regulators to delay their review of the merger in order to deal with more pressing matters, like federal funding for the gaming industry.

“There are much more important things happening in our country and industry,” Nevada Gaming Control Board Chair Tony Alamo told The Post. “Rest assured, the merger is still under investigation,” Alamo said.

Every day the clock ticks, however, is a day the coronavirus wages war on casinos, hotels and the economy at large. And that could make it harder for Eldorado CEO Tom Reeg to sell the idea of a hotel and gaming colossus strapped with $21 billion in debt, experts said.

Howard & Howard attorney Jennifer Carleton, who formerly represented Caesars, told The Post she would not be surprised if Nevada regulators don’t approve the debt-heavy merger in light of the toll the coronavirus has taken on the industry.

“The requirement regulators have is to make certain that this merger is beneficial to the state and industry as a whole,” she said. “If the regulators get this wrong it will have a massive impact on Nevada.”

Eldorado — an acquisitive chain of gambling houses that also owns Lady Luck and Isle of Capri — has promised Wall Street $500 million in cost savings from the deal, and the prospects of layoffs is expected to attract regulatory scrutiny. If the bid is denied, Eldorado could also be forced into layoffs to pay an agreed-upon $837 million breakup fee, industry insiders say.

The Tropicana parent reported $206 million in cash and a $500 million revolving line of credit at the end of the fourth quarter, giving it access to just $706 million cash in hand. Deutsche Bank this week said Eldorado has already drawn down $480 million on its $500 million revolver, but didn’t say what it planned to do with that money, if anything.

The drawdown comes as casino revenues plunge in the face of the coronavirus.

Wall Street investment bank Cowen, for example, predicts Eldorado could lose as much as $215 million in the second quarter if its casinos stay closed through June.

Another gaming analyst, who asked not to be named, predicts Las Vegas strip gaming revenue will decline by as much as 50 percent in 2020 if the coronavirus outbreak interferes with the fall football season — and 35 percent if Las Vegas Raiders games go forward as planned.

Adding to Eldorado’s financial stress are the millions of dollars it has to fork over in so-called ticking fees until its deal with Caesars is closed or squashed.

When Eldorado agreed to buy Caesars, it said it would fork over at least $2 million a day for each day the merger was delayed starting on March 25. That fee, which has risen to $2.5 million a day based on Caesars’ depressed stock price, is expected to go directly to Caesars’ shareholders, including hedge fund billionaire Carl Icahn, Caesars’ biggest shareholder with a 17 percent stake.

The ticking fee is currently on track to cost at least $100 million, assuming Nevada gaming regulators OK the deal at their next meeting in April, followed by New Jersey regulators, who are aiming to meet in May at the earliest.

“The next possible meeting is May 13,” the Garden State’s Casino Control Commission Chair Jim Plousis told The Post. Plousis said the New Jersey Division of Gaming Enforcement, the agency responsible for investigating the Eldorado/Caesars merger, has not yet made a recommendation to his commission, which would then decide whether to approve the deal.

If the deal gets blocked, Eldorado’s $837 million break-up fee could push Reeg’s chain into bankruptcy unless it boosts its cash coffers, sources said.

“That’s definitely another factor the Gaming Commission will have to consider,” Carleton, the gaming lawyer, said. “That will definitely be a factor.” Eldorado currently employs about 15,500 people, according to regulatory filings, while Caesars employs 64,000.

Eldorado didn’t return a request for comment and Caesars declined to comment.

Even when the coronavirus threat lessens, Vegas isn’t expected to turn on the lights full blast, according to Nevada’s gaming chair Alamo.

“I think it’s not going to be an on-off switch. This probably will come back in phases.”

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