Four High-Yield Shops Circle Caesars Mezz
A J.P. Morgan syndicate has placed the lion’s share of the $650 million mezzanine portion of a debt package on Caesars Palace in Las Vegas with four high-yield investors.
The investors are Canyon Partners Real Estate of Los Angeles and three New York shops: Oz Management, Solus Alternative Asset Management and Soros Fund Management.
The J.P. Morgan syndicate has agreed to supply the overall $2.2 billion debt package to a new REIT, VICI Properties, that will inherit the 3,974-room Caesars Palace along with 17 other casino/resorts from Caesars Entertainment as that company emerges from bankruptcy.
The four-bank syndicate, which includes Barclays, Goldman Sachs and Morgan Stanley, will securitize the $1.55 billion senior portion of the debt package in an upcoming stand-alone offering.
The remaining $650 million will be carved into three mezzanine tranches — a $200 million senior piece, a $200 million intermediate piece and a $250 million junior piece. The portions placed with the four investors are vertical slices, each made up of pieces of the senior, intermediate and junior tranches.
The buzz is that the mezzanine debt is being placed with a total of 6-8 investors, but that the bulk is going to Canyon, Oz (the new brand name for Och-Ziff Capital), Solus and Soros.
The coupon on the senior mezzanine tranche will be between 6% and 7%, according to market pros.
Caesars Entertainment owns, operates or manages 37 casino and resort properties in 14 states and overseas, primarily under the Caesars, Harrah’s and Horseshoe brands. Over the past several years, it was weighed down by a heavy debt load. The company, controlled by Apollo Global of New York and TPG Capital of Fort Worth, Texas, filed for bankruptcy in early 2015. Under a reorganization plan, it will separate its casino operating business from its property holdings. The new REIT will initially own 18 casino resorts and a few golf courses. It will also have the option to buy other Caesars properties.