Category Archives: Bankruptcy

From the retail issue: Retail has seen brighter days. But one companys loss may be anothers gain.

As more retailers shutter in the wake of shifting consumer patterns, the rampant store closures provide an unprecedented opportunity for brokers and attorneys to seize new business, unearthing a ripe market of backfilling, subleases, concession negotiations and litigation.

Brokers and consultants working for both tenants and landlords say theyve seen a surge in such business.

Every day I get a list of companies filing for bankruptcies, said Leslie Mayer, an executive director of retail services at Cushman & Wakefields West Los Angeles office. But these situations create an opportunity for both landlords and other tenants.

On the tenant side, brokers and bankruptcy attorneys can capitalize on retailers that want to optimize cash flow from their real estate assets. In many cases, this means hiring disposition teams to negotiate out of leases.

On the landlord side, leasing brokers have the opportunity to backfill vacated spaces and potentially bring in investors to reposition entire retail developments into mixed-use complexes.

Were seeing an uptick in litigation as well as strategic counseling and negotiation, said Y. David Scharf, a partner at Morrison Cohen, a Manhattan law firm that represents both retail tenants and landlords. The tensions are higher now than I recall seeing them in many, many years.

Losing liquidity

For the likes of Payless, BCBG and American Apparel, filing for bankruptcy can indicate that companies were not able to downsize in time, experts say. If retailers were more conscientious about how their leases affect their operations and hired the right disposition team, bankruptcy could be avoided.

The smartest companies get way ahead of it, but the typical company is in denial, said Thomas Mullaney, managing director of JLLs retail restructuring services in Manhattan. Like a patient on a gurney, they continue to lose blood liquidity month after month after month until they finally collapse into bankruptcy.

In bankruptcy proceedings, retailers have two choices with their leases: Assume the lease or surrender it to the landlord.

Within 60 days of filing, they must assess the performance of each retail location and make the decision to stay or to shutter it.

The bankruptcy filing will protect retailers from legal action and eviction by their landlords, and may excuse them from unpaid rent from the previous few months leading up to the bankruptcy. But when the petition is filed, the retailer is liable for every cent of rent owed from that point on.

However, a bankruptcy doesnt have to be the end of the world.

Bankruptcy doesnt mean youre going out of business, it just means youre going to restructure, said Mullaney, who works with retailers that want to consolidate.

More than a decade ago, Mullaney and his team helped the Houston-based crafts store Garden Ridge work through its bankruptcy. The company went public in 2016.

There are also strategic-closure bankruptcies, in which retailers will have already picked out real estate companies to work with to evaluate which leases to assume, which to reject and which to assume and then assign subleases, according to Garrick Brown, Cushman & Wakefields director of retail research in the Americas.

Among the entire brokerage community, the second we hear a retailer is going bankrupt, we try to get a list of their store locations and evaluate how good the real estate is, Brown told TRD. We have corporate services that specialize in this. Theres nothing new here except for the sheer number of bankruptcies its unprecedented.

Now, Brown added, every major national brokerage has groups that focus on distressed retailers and their leases. Still, nine times out of 10, its best for all parties involved if bankruptcy can be avoided.

Damage control

For the tenant at risk of bankruptcy, the first strategy is to look for a broker, according to Scharf, and make a contingency plan.

A broker will see what the market is going to bear in terms of getting replacement tenants for your leases. You may have assets in only some of these leases, and certain locations may be liabilities, he said. If theres going to be a bankruptcy, youll have to make decisions very early on, which leases youre assuming and which ones youre rejecting.

Next, with the broker, the retailer will want to engage its landlords and try to renegotiate lease terms.

Very often landlords will want to negotiate some kind of arrangement or discount because of the concern that if one tenant leaves and then another leaves, other tenants have an opportunity to legally cancel their lease, Scharf explained. So very often the larger tenants have leverage over landlords.

Scharf and his firm were recently tapped by Kenneth Cole to represent the designer in a lawsuit filed by Simon Property Group, which sought to keep 43 outlet stores open after Cole made the decision to shutter them.

There are several strategic issues that arise in the case of closures, the attorney said. An empty or dark store obviously looks bad for mall operators, so theyll likely invoke contractual obligations such as the go-dark provision, which says a tenant cannot cease operations at an ongoing lease.

In that case, however, a tenant may choose to dress the window and keep the light on but still halt the operation of the store, Scharf said. This tactic satisfies the obligation, but landlords hate it, which gives tenants a window for negotiating concessions on rent or other accommodations.

A lot of companies may not realize that the capitalized value of their leases may be as big as their bank loans or overall bonded indebtedness, according to Mullaney. But unless a retailer has an internal real estate department, like Macys or Sears, managing leases is typically too great a feat to handle.

Its entirely possible that a company has a borrowing capacity with Wells Fargo for $250 million, and that this is something the chief financial officer can deal with him or herself, he said. But when it comes to leases, they could have hundreds with countless different landlords. Thats a logistical nightmare, and thats where our firm comes in.

Mullaney operates a 10-person team scattered throughout the country to negotiate on behalf of retail chains. On the other side of the negotiations, the landlords have their own consultants as well.

Backfill patrol

When a tenant leaves, the landlords biggest fear is a domino effect with tenants leaving one after another. This means that it must consider providing concessions and abatements to keep [the store] operatingeven if it means forgiving past rent, Scharf said.

But when a big tenant leaves, it could be a golden opportunity for the mall operator, according to Larry Jensen, JLLs director of development, operations and tenant coordination.

There are so many options today that if its a piece of real estate, you really dont have to worry about it, said Jensen, whose team works with mall landlords to fill and sometimes even reposition large spaces vacated by struggling department stores.

Like the strategies employed on the tenant side, its best to have preemptive ones in place.

[As a landlord], you constantly assess the performance of your existing retailers. If this person leaves, if that person leaves, what do you do? he told TRD. You, the broker, have those discussions with the owners of that property. It might even trigger a landlords desire to sell the property.

Jensen worked with a Midwestern mall owner a couple of years ago to buy back a department store and redevelop the space into a mixed-use center with a theater, restaurant and a handful of smaller retailers including a Talbots, a DSW shoe store and a salon.

When theres an empty space, typically your first thought is entertainment. Can you add a theater? If so, can you add a restaurant, a Dave & Busters? And then you look at other options a Dicks, T.J. Maxx or a Home Goods, he said. Grocery stores and health clubs are other options.

For smaller spaces, there are retailers interested in taking what are called second-generation spaces.

Mayer, of Cushman in L.A., represents Skechers, a retailer that takes advantage of vacated properties.

Its kind of a bit of a musical-chairs situation, she told TRD. Skechers is one of the retailers taking advantage of these second-generation spacesthese are great opportunities for Sketchers to come in and say, We move fast and have great credit.

At the end of the day, the retail industry has no choice but to accept the changing market. But change isnt anything new.

If you went to a shopping center in the 1980s, you saw Stride Rites and Naturalizers. All of those guys are dinosaurs now, said JLLs Jensen. The mall has been reinvented three times. So thats whats new? We arent scared of it, we just deal with it let the young eat the old.

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How brokers are making bank from retail bankruptcies - The Real Deal Magazine

Peabody is benefiting from the natural gas price hike.

BACKSTORY Coal giant Peabody Energy filed for bankruptcy in 2016, raising doubts about whether it would fulfill its legal obligation to reclaim land that it mined in Wyomings Powder River Basin. The company had self-bonded, meaning that it promised to pay to restore damaged land and water sources rather than posting cash or bonds up front. After Peabody and two other self-bonded companies declared bankruptcy, the government released a policy advisory warning states against self-bonding (Coal company bankruptcies jeopardize reclamation, HCN, 1/25/16).

FOLLOW UP Peabody emerged from bankruptcy in March, with one of the conditions being that it will no longer self-bond. In May, the company reported a 29 percent increase in revenue over the same period last year, with quarterly net income the highest in five years. Peabody attributes this to increased revenue from its Australian mines and greater demand for coal from Western utility companies due to higher natural gas costs. It also praised the Trump administration for its strong actions supporting coal.

Original post:

Latest: Coal giant emerges from bankruptcy - High Country News

Business Fundamentals

Seadrill Limited (NYSE:SDRL) is a company offering services in deep sea oil exploration, and its share price and business model has been seriously tested in the recent three years with low oil prices. As a result, Seadrill shares have dipped below $1.00 to $0.524 per share, 98.8% below its all-time high. In addition, the stock will be delisted from the NYSE unless it trades above $1.00 within 30 days. Unfortunately for Seadrill, the oil price situation is unlikely to improve soon, and investors should definitely stay away from Seadrill shares. For current Seadrill shareholders, the author recommends to sell shares even at the depressed valuation.

Summary of Company Information

Macro Headwinds: Revenue Decreasing, Contract Expiring

In general, Seadrill Limited needs around $65 to $75 in Brent crude for its services to be in demand. At the very least, Seadrill will need $65 to renew some of its existing contracts, and the company will require around $75 per barrel Brent to achieve decent day rates and full rig utilization.

Unfortunately for the company, oil prices are currently stalling at around $54 per barrel Brent, and Seadrill will have no way to renew its expiring contracts. To make matters worse, the company's revenues have decreased for each of its last four quarters - most recently dropping 10% to 667 million for the fourth quarter of 2016. Refer to the following chart for details on the company's revenue and operating income in 2016.

Unfortunately, this decreasing revenue trend is expected to continue and even accelerate into 2017 because more and more contracts are expiring in 2017. In fact, take a look at the chart below for a summary of its contract situation and decreasing day rates.

Number of Contracts

Contracts expiring in 2017

20

Longer term contracts

27

Expiring contracts total day rate

~$5.0M per day worth of contracts in total expiring within 6 months

Due to the expiring contracts, the company may start to face liquidity problems as a total of $450M per quarter of revenue will start to expire within 6 months. As a result of these contract expirations, Seadrill's operating revenues are expected to decrease steadily in the next 6 months. To understand the severity of a loss of $450M per quarter in income, note that the company's total cash pile is only $1.2B with almost no way for additional debt financing (debt over $10B) or equity financing (shares at $0.50). In conclusion, expiring contracts are about to push Seadrill into bankruptcy.

Bankruptcy and Liquidity Situation

As noted above, Seadrill may have liquidity troubles as early as 2018. To avoid this situation, Seadrill will need the price of oil to breakthrough to $65 to $75 range to help the company renew contracts and bring in new revenue. In order for that to happen, two of the three following items may have to materialize:

Conclusion

In conclusion, Seadrill's future is bleak even though oil prices have broken through to $54 per barrel. Contracts will continue expiring and the company's revenues will continue to suffer. As a result, investors should sell or stay away from Seadrill common shares even at its current depressed valuation.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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Seadrill: Bankruptcy Looming - Seeking Alpha

Mike Baur, CEO, Scansource

According to the CEO for ScanSource, Mike Baur, some of the larger enterprises working with Avaya have had to delay their plans for expansions and upgrades, because of the vendors position with Chapter 11 bankruptcy. Recently, ScanSource saw a fall in their Avaya-related sales for larger enterprise businesses, simply because of the uncertainty plaguing the market since Avaya filed for bankruptcy.

Although Baur noted that he feels the current issue is a pause, rather than a change, its worth noting that Avayas activities are having pretty big impacts on the sector. For ScanSource, Avaya is one of three vendors providing a significant percentage of the companys sales for last year.

Avaya first filed for Chapter 11 bankruptcy protection during January, and announced its plans in March to sell its networking sector onto Extreme networks. ScanSources CEO noted that company is familiar with Extreme, and they believe that if the acquisition is successful, the distributor will be able to transition its networking solutions to Extreme, and continue providing the same services without much disruption.

Of course, Avayas main business focuses on the contact centre. Networking partners only came to Avaya later, and Baur noted that they contribute only a small piece of the overall business pie.

According to ScanSource, the sales for the third quarter saw an increase of around 1.9% from the previous year, raising to $813.5 million. That means that they missed their prediction of $833.1 million. Additionally, earnings fell 11.4% per share, from $0.54 last year, to $0.49 this year. Additionally, on a non-GAAP basis, earnings fell to $16.4 million, or around $0.65 per share.

ScanSource saw a growth of around 30% over the past year in terms of business, around their master agent Intelisys. The distributor acquired this company during August of 2016, for around $83.6 million. Currently, ScanSource is educating VARs in Intelisyss business model, though they dont expect a growth of 30% every quarter.

Though things have remained shaky for Avaya, ScanSources stock stayed unchanged at around $40.70 per share in trading. During the next quarter, ScanSource expects diluted earnings per share of between $0.64 and $0.71 a share on sales that reach between $860 and $920 million.

Naturally this was going to happen, some Avaya sales orders will be on hold at present and some orders may have been placed with other vendors. Its looking like Avaya will be out of chapter 11 bankruptcy by late Summer 2017, I wonder whether ScanSource will have an extra flurry of orders as soon as everyone knows Avaya are a safe bet?

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ScanSource Sales Suffer Due to Avaya Chapter 11 Bankruptcy - CommsTrader

Caesars Entertainment Corp. Chief Executive Officer Mark Frissora wants to develop more than 90 acres the company owns in Las Vegas, including land right in front of Caesars Palace, after its largest unit emerges from bankruptcy later this year.

We have a lot of real estate thats underutilized, Frissora said in an interview with Bloomberg TV Thursday. We have plans to basically develop all of that very valuable center-strip property as soon as we emerge. Those assets will have a very high-return, low-risk profile.

Caesars, the largest owner of casinos in the U.S., has struggled under a mountain of debt since a $30 billion leveraged buyout in 2008. In January of 2015, the company put its largest division, Caesars Entertainment Operating Co., into bankruptcy. Its expected to exit in the third quarter.

The Las Vegas-based company has enjoyed growth in sales and profit over the past two years, due in part to a strategy of renovating hotel rooms and searching for cost savings in places ranging from parking lots to guest check-in. Caesars hosted a nearly three-hour-long presentation for analysts in Las Vegas Thursday.

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As part of the bankruptcy restructuring, Caesars is creating a real estate investment trust that will own many of the companys casinos, including the flagship Caesars Palace in Las Vegas. Debt and other obligations will be reduced to $14.6 billion from $23.5 billion in 2014, the company said. Fixed costs, including interest expense and rent, will decline to $1.28 billion annually from $2.67 billion three years ago.

Caesars has reduced promotional costs, like the amount of free casino chips it gives customers, while maintaining its market share in key cities, Chief Financial Officer Eric Hession said in the presentation. The company has cut $800 million in annual expenses over the past two years.

With its balance sheet repaired, Caesars is looking at new markets for expansion, including Japan, South Korea, Canada and Brazil. The company wants to hire more people in mergers and acquisitions and in casino development, Frissora said during the investor day.

Hotel revenue has been a source of growth. Average room rates in Las Vegas have risen to $140 a night last year from $92 in 2012, the company said. About 56 percent of the companys Las Vegas rooms will be remodeled by the end of the year. All of the companys Las Vegas hotels will be charging for parking by the end of June.

Almost one third of the companys guests in Las Vegas now use self-service kiosks to check-in to the hotels, technology that frees up hotel staff. The land Frissora wants to develop includes 50 acres behind the Ballys resort, almost 40 acres behind the Linq and seven acres in front of Caesars Palace.

Competitors including MGM Resorts International and Wynn Resorts Ltd. have also been remodeling their properties and adding pedestrian-friendly features that emphasize shopping, entertainment and dining more than gambling.

We are excited because we have a lot of growth plans weve not been able to act on because of the complicated structure of Caesars, Frissora said. Once we emerge, we will be able to do a lot of development projects around the world as well as M&A activity.

Original post:

Caesars Plans New Las Vegas Developments After Bankruptcy Exit - Bloomberg

Daniel B. Kline, The Motley Fool 11:12 a.m. ET May 19, 2017

A sign announces the closing of a retail store in lower Manhattan on April 17, 2017.(Photo: Spencer Platt, Getty Images)

Some call it the "Retail Apocalypse," and blame the rise of the internet, while others see the growing number of retail bankruptcies as a sort of market correction for chains not built to compete in 2017.

However you view it, the number of casualties has been piling up. In fact, through the first three months of 2017 nine retailers sought bankruptcy protection, according to CNBC.

That matches the total number of retail bankruptcies in 2016, and puts the year on pace to tie 2009's record, where 18 chains filed for bankruptcy protection, according to CNBC.

Those numbers have continued to grow in the second quarter of2017 with Rue21, Payless, and Bebe filing in April. And, after the recent round of disappointing earnings news reported by many retailers, there's no reason to believe the second half of they year won't continue the trend.

Rising interest rates present further problems for distressed retailers, making it harder and more expensive to raise needed capital. That could be the tipping point that sends some of the 19 companies on Moody's Investor's Service March list of distressed retailers (which includes Rue21 and Payless, which have already filed for bankruptcy protection) into bankruptcy.

Those companies reportedly had over $3.7 billion in debt that matures over the next five years with about 30% of it due by the end of next year. As sales at the chains, which include well-known names like Sears Holdings, David's Bridal, and Gymboree, continue to fall, rising interest rates could make it harder to refinance and push debt out.

So far, apparel players, especially ones targeting younger shoppers, have been the hardest hit. In addition to Rue21, The Limited, Wet Seal, and BCBG Max Azria, have all filed for bankruptcy protection this year.

Going forward, however, apparel chains have only the third biggest risk of defaulting on their debt,behind electronics retailersand department stores, which have the highest risk, according to Bloomberg.

Department stores may be struggling the most visibly, with Sears Holdings teetering on the edge of extinction, and J.C. Penneyand Macy's struggling. Of those three, only Sears appears headed toward bankruptcy protection in the near future, but the other two are increasingly vulnerable if current operating conditions worsen.

In addition to the bankrupt players in the apparel space, the entire category could be negatively impacted by the woes facing department stores. If a mall loses an anchor store like Sears, J.C. Penney, or Macy's, that impacts traffic to the whole shopping center. That could create a sort of domino effect, drawing down customer counts across an entire mall.

More chains are going to go out of business and close more locations. In addition, the loss of so many chains, and the shrinking of others will cause some shopping malls to close or contract.

For retailers to survive, they will need to find models that give consumers a reason to visit their stores. Both J.C. Penney and Macy's have starting doing that by integrating store-within-a-store concepts, and integrating the online and real-world shopping experience.

What's very clear is that few brick-and-mortar retailers are immune and that for many, things will get worse before they stabilize. There's no one blueprint for competing in this new reality where consumers have much less reason to leave their house. Competing in that marketplace will require a major pivot from many traditional retailers, and some won't be able to make that happen.

Daniel Kline has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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Retail bankruptcies are exploding; here are the sectors where it's happening - USA TODAY

NEW YORK The U.S. Department of Justice's bankruptcy watchdog said on Friday it plans to appoint a committee of retirees in Puerto Rico's bankruptcy to negotiate for pensioners facing benefit cuts as part of the island's debt restructuring.

Puerto Rico, carrying some $50 billion in unfunded pension liabilities, "clearly needs a retiree committee and sooner rather than later," the office of the U.S. Trustee said in a filing in federal court in San Juan.

Puerto Rico filed the biggest municipal bankruptcy in U.S. history earlier this month. In addition to its pension debt, the U.S. territory has around $70 billion in bond debt it cannot pay.

While retiree committees are common in bankruptcies with big pension debts, the Trustee in Puerto Rico's case took the rare step of announcing intentions to appoint a committee without waiting for a blessing from the judge in the case, U.S. District Judge Laura Taylor Swain.

"The Trustee typically will refrain from exercising his discretion ... to appoint an additional committee until the court has an opportunity to rule," the filing said. "But this case is not like most cases."

Puerto Rico's biggest public pensions are almost 100 percent underfunded, a gap thought to be the largest state-level pension hole in U.S. history.

The federally-appointed board overseeing the island's finances has called for cuts to pension benefits, saying they are necessary to pull the island out of a crisis marked by a 45 percent poverty rate, unemployment more than twice the U.S. average, and near-insolvent public health systems.

The Trustee said it expects to complete the solicitation process for the committee by June 16.

At the island's first bankruptcy hearing this week in San Juan, Robert Gordon, an attorney for an informal group comprising 91,000 retirees, argued "they have earned the right to participate in this process."

The Trustee, however, stressed in its filing that Judge Swain should not grant Gordon's group the right to serve as the official committee. Appointing the committee is the job of the Trustee, the filing argued.

Gordon could not be immediately reached for comment.

(Reporting by Nick Brown; editing by Grant McCool)

RIYADH National oil giant Saudi Aramco expects to sign $50 billion of deals with U.S. companies on Saturday, part of a drive to diversify the kingdom's economy beyond oil exports, Aramco's chief executive Amin Nasser said.

HANOI U.S. President Donald Trump's new trade representative held his first face-to-face meetings with some key partners on Saturday as the United States charts an "America First" policy that has upended the old global order and sparked fears of protectionism.

DUBAI Saudi Arabia's energy minister said on Saturday all oil producers were in agreement to extend crude output cuts by nine months, Bloomberg Television reported.

Read more here:

Puerto Rico retirees will get bankruptcy committee: US Trustee - Reuters

Forbes

Can Student Loans Be Discharged In Bankruptcy? Forbes One facet of higher education finance has not changed, however: the inability to discharge your student loans in bankruptcy. I interviewed Josh Cohen, a Vermont-based attorney who specializes in student loans, to share his perspectives. Zack Friedman ... Trump's first full education budget: Deep cuts to public school programs in pursuit of school choiceWashington Post all 76 news articles »

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Can Student Loans Be Discharged In Bankruptcy? - Forbes

Lilis Energy CEO Avi Mirman

Lilis Energy CEO Avi Mirman

Q&A: How an energy company dodged bankruptcy in oil bust

In 2015, Lilis Energy cut most of its workers, wrote down the value of its reserves to almost nothing and didn't pay its executives for four months as it wrestled to avoid bankruptcy during the oil bust.

Hundreds of U.S. energy companies filed in bankkruptcy courts, but Lilis Energy CEO Avi Mirman said he and the only other people left at his oil company - a chief financial officer and general counsel - were determined to avoid bankruptcy proceedings, even though it cost them their paychecks. Instead, Mirman invested his own money in the company, and Lilis raised stock-market capital to acquire Brushy Resources, a San Antonio-based driller with property in the prolific Permian Basin in West Texas.

"We were living by the skin of our teeth," Mirman said. "But we refused to go into bankruptcy."

Lilis recently spoke to the Houston Chronicle about how his company came through the downturn without falling into bankruptcy. Edited excerpts:

Lilis Energy

HQ: San Antonio

2016 Revenue: $3.4 million

2015 revenue: $396,000

Head count: 40

Drilling: Planning one well per month in 2017

Q: What happened to Lilis Energy during the downturn?

A: As you know, 2015 was a pretty rough year for most of us in the oil and gas business. We were close to filing for bankruptcy. We got delisted. But none of us wanted to go bankrupt - none of us wanted that to our names. We had to let everybody go except three people in the management team. We didn't take a check for four months. In 2015, the value of company assets were less than the size of the loans.

Q: So what did you do?

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A: We're finance people. My specialty has been in distressed mergers and acquisitions. What better industry to exploit? We found a company in the Permian Basin and agreed to acquire them in December 2015. We raised another $20 million in equity. We also drew $31 million from a new credit facility, and it was a super-friendly loan with minimal covenants, not the kind of loan you'd see an energy company get back then. That helped propel us forward.

(Lilis Energy refinanced its debt by converting some of it to equity, closing its acquisition of Brushy Resources in June 2016 and applying for relisting on the Nasdaq. And oil prices rose.)

Q: What are your plans now?

A: We're substantially bigger now, with some 40 people, including 25 to 30 in San Antonio. And it's a bit different today because the cost to drill a well is substantially lower. We want to drill about a dozen wells in 2017. We expect to drill a well a month, and we expect to deploy a two-rig program in 2018 and drill about 20.

Q: What's happening in the oil patch now?

A: I do expect service prices to go up. Frac sand prices have gone up dramatically higher than it was six months ago. It affects your economics. But I'd like to think we can somehow do some cost containment.

Q: After all these bankruptcies, is the industry any better for it?

A: OPEC's first goal was to flood the market and get prices to the point where they put a lot of us out of business. But lower prices backfired on OPEC. The assets that were in the hands of the weak are now in the hands of the strong. They're not going to be able to smoke U.S. producers out.

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Q&A: How an energy company dodged bankruptcy in oil bust - Houston Chronicle

(Bloomberg) Caesars Entertainment Corp. Chief Executive Officer Mark Frissora wants to develop more than 90 acres the company owns in Las Vegas, including land right in front of Caesars Palace, after its largest unit emerges from bankruptcy later this year.

We have a lot of real estate thats underutilized, Frissora said in an interview with Bloomberg TV Thursday. We have plans to basically develop all of that very valuable center-strip property as soon as we emerge. Those assets will have a very high-return, low-risk profile.

Caesars, the largest owner of casinos in the U.S., has struggled under a mountain of debt since a $30 billion leveraged buyout in 2008. In January of 2015, the company put its largest division, Caesars Entertainment Operating Co., into bankruptcy. Its expected to exit in the third quarter.

The Las Vegas-based company has enjoyed growth in sales and profit over the past two years, due in part to a strategy of renovating hotel rooms and searching for cost savings in places ranging from parking lots to guest check-in. Caesars hosted a nearly three-hour-long presentation for analysts in Las Vegas Thursday.

As part of the bankruptcy restructuring, Caesars is creating a real estate investment trust that will own many of the companys casinos, including the flagship Caesars Palace in Las Vegas. Debt and other obligations will be reduced to $14.6 billion from $23.5 billion in 2014, the company said. Fixed costs, including interest expense and rent, will decline to $1.28 billion annually from $2.67 billion three years ago.

Caesars has reduced promotional costs, like the amount of free casino chips it gives customers, while maintaining its market share in key cities, Chief Financial Officer Eric Hession said in the presentation. The company has cut $800 million in annual expenses over the past two years.

With its balance sheet repaired, Caesars is looking at new markets for expansion, including Japan, South Korea, Canada and Brazil. The company wants to hire more people in mergers and acquisitions and in casino development, Frissora said during the investor day.

Hotel revenue has been a source of growth. Average room rates in Las Vegas have risen to $140 a night last year from $92 in 2012, the company said. About 56 percent of the companys Las Vegas rooms will be remodeled by the end of the year. All of the companys Las Vegas hotels will be charging for parking by the end of June.

Almost one third of the companys guests in Las Vegas now use self-service kiosks to check-in to the hotels, technology that frees up hotel staff. The land Frissora wants to develop includes 50 acres behind the Ballys resort, almost 40 acres behind the Linq and seven acres in front of Caesars Palace.

Competitors including MGM Resorts International and Wynn Resorts Ltd. have also been remodeling their properties and adding pedestrian-friendly features that emphasize shopping, entertainment and dining more than gambling.

We are excited because we have a lot of growth plans weve not been able to act on because of the complicated structure of Caesars, Frissora said. Once we emerge, we will be able to do a lot of development projects around the world as well as M&A activity.

To contact the reporter on this story: Christopher Palmeri in Los Angeles at [emailprotected] To contact the editors responsible for this story: Crayton Harrison at [emailprotected] Rob Golum, Paul Barbagallo

2017 Bloomberg L.P

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Caesars Plans New Las Vegas Developments After Bankruptcy Exit - National Real Estate Investor