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Britney Spears kept Caesars alive
Cash running out
By 2014, Caesars was running out of cash. Its EBITDA was around $1.5 billion, which was $300 million less than the interest expense at the operating company alone, and the one covenant that mattered was at risk of being breached. The mortgages at the property company were coming due as well.
The residency plan
Gary Vee, the social media guru of the time, helped come up with a plan. Caesars pulled Britney Spears out of retirement for a residency at Planet Hollywood, the casino it had taken a controlling interest in. The Backstreet Boys followed, along with other icons from the childhoods of people who were now in their twenties and thirties.
The idea was to capture the millennial wallet, the young adults who were starting to have money to spend in Vegas. Tickets were very hard to get, and the plan worked. Things had started to go south for Spears around then, so it was a real risk that she would not be able to pull it off.
The residency kept Caesars afloat a little longer, but it was not enough to save the company. Apollo and TPG turned to a far more aggressive restructuring.
Why do casinos book long Vegas residencies?
A residency lets a casino sell the same show night after night without moving a production. Fans travel to Las Vegas for it, and they also book rooms and spend on dining and gambling. The format grew from the lounge acts of the 1950s. Elton John's Red Piano show began at Caesars Palace in 2004.
How does breaching a covenant hurt a company?
A covenant is a promise in a loan agreement, such as keeping debt below a set multiple of earnings. Breaking it puts the borrower in technical default, which can let lenders demand repayment or force new terms. Lenders often grant a waiver in return for fees or tighter conditions. A breach does not by itself put a company into bankruptcy.
Why did casinos chase millennials?
Pew Research Center defines millennials as people born from 1981 to 1996. In 2014, the oldest of them were in their early thirties, the age when many start earning more. Las Vegas resorts at the time expanded nightclubs, pool parties, and headliner shows toward younger visitors. Those venues charge for entry and drinks, separate from gambling.
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