Apollo and TPG fund Caesars venture

The firms, which acquired Caesars for almost $30bn in 2008, will contribute $250m each to form a venture to pursue growth opportunities and help bolster the company’s balance sheet.

Apollo Global Management and TPG will invest $250 million each into a growth-oriented venture called Caesars Growth Partners intended to help the parent company pursue growth opportunities.

“The transaction is an important step in our ongoing efforts to improve the company’s balance sheet and position ourselves to make strategic investments,” Gary Loveman, chairman, president and chief executive officer of Caesars said in a statement Wednesday.

Caesars Growth Partners will be owned by Caesars and participating shareholders. The venture will seek to allow Caesars to pursue growth opportunities in a “less levered and more flexible vehicle than its existing operating subsidiaries”, the company said in the statement. If the venture receives full shareholder participation, it will raise $1.2 billion, the company said.

The company plans to use proceeds from the venture to acquire the Planet Hollywood Resort & Casino in Las Vegas, Caesars’ joint venture interest in a casino under development in Baltimore and a financial stake in the management fee stream of both those properties, according to the statement.

TPG and Apollo did not respond to a request for comment as of press time.

The casino operator, formerly known as Harrah’s, has struggled with its debt load since its $27.8 billion leveraged buyout by Apollo and TPG. The deal included $3 billion of equity, of which Apollo contributed $1.3 billion. Caesars experienced slumping revenues following the deal, especially in 2009, but more recently in the wake of Hurricane Sandy, which forced Atlantic City casinos to close for five to seven days, costing operators millions of dollars in losses.

Moody’s Investors Service downgraded Caesar’s credit rating earlier this month, with a negative ratings outlook. “Caesars has experienced a continuation of negative gaming revenue trends so far in 2013 across most of the company’s major markets, as a longer lasting rebound in gaming demand has been derailed again, this time by higher taxes that are reducing  consumers’ discretionary income,” Moody’s said in its rating report from 5 April.

The firms took Caesars public last year, raising about $16 million in the initial public offering. The company was trading at $15.77 per share early Wednesday.