When Jay Sarno visited the Las Vegas strip back in the 1960s, he dreamed of building the largest resort someday. The then owner of the Cabana Motel chain in California, Sarno put his motel expansion plans on hold. He decided to stay back in Vegas, owing to the huge potential and cheap land rates. His vision took the form of Caesars Palace, and little did he realise that it would soon be the yard-stick for modern casino resorts. Even after many decades and many invasions of Nevada’s “Pride Lands”, Caesars is a symbol of overindulgence and opulence.
Why so Mighty?
Sarno envisioned a casino with a Greco-Roman theme, with luxuries for customers, fit for the feted Roman Emperor Caesar himself. Teamsters Union Central States Pension Fund stepped in with the financial requirements and Sarno secured a loan of $10.5 million. The thirty-four acre strip across the famous Flamingo Hotel was the chosen site for the project. Noted European architect Melvin Grossman turned the dream of the $19 million extravagant property into reality. It was fitted with Roman-style friezes and statues, magnificent fountains and Roman columns, chiselled in Italian Carrera marble.
True to its name and vision, the casino achieved the $1 million mark in revenues on its 1966 opening party itself. It surpassed other popular establishments like the Desert Inn and Tropicana in terms of extravagance. Costume actors who played Cleopatra and Caesar to greet guests, become more like the tradition of the famous resort, continuing through the years.
The 700-room hotel casino resort came with many attractions for the guests. Rich gourmet restaurants with free-flowing wine and sensuous Roman Goddesses for waitresses; lavish suites with Jacuzzi tubs; and showroom booking performances by Barbra Streisand and Frank Sinatra were all sought after by celebrities and aristocrats alike.
Sliding into Distress
Today, the tabloids are filled with predictions and gossip of Caesars Palace’s financial doom. Experts say the financial state was many years in the making. The fight with debt has lasted six years already, starting 2009 and amounting to over $20 billion. The situation is not made easy to understand for the general public. Many details remain confidential until the company wraps up its negotiations with creditors. However, some filing with the United States Securities and Exchange Commission (SEC) sheds light on certain aspects.
The operating company, Caesars Entertainment Corporation, runs brands like Caesars, Horseshoe and Harrah’s; owning 44 resorts and casinos across the United States. It heads ventures like the Paris, Flamingo, Linq Hotel, and other Hollywood resorts.
As of November 2014, Caesars Entertainment Corporation is far from making any profit, according to reports by Bloomberg News, with Caesars Palace reporting losses of $908.1 million in the third quarter of 2014, more than any other casino in Vegas. It seems like the hit the establishment took during the recession is not going away any time soon; and the largest unit of the company is doomed to run out of cash in 2015, unless drastic measures are taken.
Is Bankruptcy a Saving Grace?
On December 19, 2014, the Corporation said that it had decided to file for bankruptcy under Chapter 11, by the end of January 2015. This would slash its $18.4 billion debt to $8.6 billion. This, along with the restructuring of the company, should help establish a sustainable capital structure. However, this bankruptcy plan will work, provided a restructuring agreement is reached with creditors, key bondholders and other stakeholders.
According to an SEC filing, the operating company proposes to follow the Real Estate Investment Trust (REIT) structure, which will split the operating unit into two companies – one with the aim of owning property and the other managing these assets. With this restructuring and the bankruptcy filing, primary creditors might get back 100% of the owed debt, while others could recoup over 93%.
Now, it is just a question of waiting and watching what fate has in store for this iconic establishment.