Leon Black is splitting his cards in Caesars Entertainment in order to save a losing hand.
America’s biggest casino operator announced yesterday that it will sell some of its most promising assets — including its online gaming venture — to a newly created entity, Caesars Growth Partners, for more than $875 million.
The assets sold to Caesars Growth Partners, an entity controlled by Black’s Apollo Global Management, were not pledged to bondholders.
Therefore, the proceeds from any sale of these casino assets would go directly to Caesars Growth Partners shareholders.
Shareholders hailed Caesars’ balance-sheet bingo, driving a 27.3 percent jump in share prices yesterday, to $15.90 in very heavy trading.
Meanwhile, the remaining Caesars, which has $2.4 billion in cash and is losing about $500 million a year, has debt trading at 64 cents on the dollar and, barring a turnaround, could collapse in less than five years, sources said.
Caesars doesn’t have any loans coming due until 2015, sources said.
“Caesars has now become a financial play on discretionary spending,” said one bondholder about the core Caesars assets without the growth engines.
“This transaction is a way for the private-equity guys to make money,” the bondholder said.
Apollo and TPG Capital in 2008 bought Caesars, then named Harrah’s, in a highly leveraged $30 billion leveraged buyout.
Caesars, which has five Atlantic City casinos, is selling to the new venture its Horseshoe Baltimore Casino, scheduled to open in 2014, its profitable Planet Hollywood in Las Vegas and Caesars Interactive Entertainment, which owns social and mobile games developer Playtika.
These assets represent most of Caesars’ potential organic growth, sources said.
Caesars Interactive would run the legal online gaming sites in states legalizing such activities.
The private-equity firms, who intend to invest $250 million apiece in the new venture, will own more than 57 percent of Caesars Growth Partners.
Shareholders can contribute funds to buy the rest.
Apollo and Caesars declined comment.