News Column

Fitch Clarifies Comment on Caesars' Showboat Closure

July 3, 2014



NEW YORK--(BUSINESS WIRE)-- Fitch Ratings released a comment last week on June 27, 2014 stating that the planned closure of Showboat is potentially a negative for Caesars Entertainment Operating Company (CEOC) since Caesars Entertainment Corp. (Caesars) could reallocate Showboat's business disproportionately to Harrah's Atlantic City, which is part of the healthier Caesars Entertainment Resort Properties (CERP).

Subsequently Fitch was informed by Caesars management that Fitch's $28 million Showboat LTM EBITDA estimate for the period ending March 31, 2014 cited in the release and based on disclosure provided by New Jersey'sDivision of Gaming Enforcement did not subtract a one-time property tax credit of $1.75 million and $19.4 million associated with centralized overhead costs allocated to Showboat by Caesars. These adjustments were referenced in the notes of the financial statements available on the regulator's site.

The EBITDA net of these adjustments is about $6 million. While the implication of the lower EBITDA estimate is that the closure is less likely to be a negative for CEOC, Fitch notes that the fixed portion of the $19.4 million overhead allocation will be reallocated among other Caesars properties, most of which will likely be absorbed by CEOC. Also the $6 million EBITDA incorporates the harsh 2013-2014 winter and may not be representative of a run-rate EBITDA (EBITDA net of overhead allocation in 2013 was $16 million).

Fitch does, however, recognize that under the more plausible scenarios CEOC will benefit from the closure as the business retained by the remaining CEOC assets in the market - Bally's and Caesars AC - will sufficiently offset the loss of EBITDA, reallocation of overhead costs and the property carry costs associated with the closure.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Fitch: Showboat Closure Possibly Bad for Caesars OpCo Creditors' (June 27, 2014);

--'Fitch Rates Caesars B7 Term Loan 'CCC/RR2'; Refi Negative for Existing CEOC Creditors' (May 7, 2014);

--'Fitch Downgrades Caesars OpCo's IDR to 'CC'; Revises Recovery Ratings' (April 28, 2014);

--'Caesars Entertainment Corp. (Parent Guarantee and Potential Debt for Equity Exchange Considerations)' (Nov. 18, 2013).

Applicable Criteria and Related Research:

Caesars Entertainment Corp. (Parent Guarantee and Potential Debt for Equity Exchange Considerations)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723615

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Alex Bumazhny, CFA, +1-212-908-9179

Director

Fitch Ratings, Inc.

33 Whitehall St.

New York, NY 10004

or

Secondary Analyst

Michael Paladino, CFA, +1-212-908-9113

Senior Director

or

Media Relations, New York

Brian Bertsch, +1-212-908-0549

brian.bertsch@fitchratings.com

Alyssa Castelli, +1-212-908-0540

alyssa.castelli@fitchratings.com

Source: Fitch Ratings


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