Caesars’ (CZR) mountains of debt raises uncertainty about the casino giant’s pending merger with Eldorado (ERI) amid the pandemic, says Dan Wasiolek, senior equity analyst at Morningstar.
“We see risk to Eldorado obtaining funding needed to close on its proposed acquisition of Caesars, considering Caesars and Eldorado’s high balance sheet leverage, as the coronavirus’ material impact on leisure and travel demand creates heightened uncertainty,” Wasiolek wrote in a note to investors.
Casino operators were forced to temporarily shut properties in March as states enacted shelter-in-place measures due to COVID-19.
Wasiolek says the planned $17.3 billion tie-up between the gaming giants expected to close in 2020 will result in only a marginally better competitive position for Caesars, which owns some of the most iconic properties on the Las Vegas strip.
“A merger would roughly double Caesars’ domestic properties to around 60 and lift loyalty membership to 65 million from 55 million,