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Caesars’ Bet on Better Days Led to Bankruptcy for Division

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In this Monday, Jan. 12, 2015 photo, a man takes pictures of Caesars Palace hotel and casino, in Las Vegas. The company said Friday, Jan. 9, it has a majority of the holders of its debt on board with a pre-planned bankruptcy agreement that would reorganize Caesars Entertainment Operating Corp. into two separate companies, one to own casino-hotels and the other to lease them, and cut its existing debt by about $10 billion. (AP Photo/John Locher)

In this Monday, Jan. 12, 2015 photo, a man takes pictures of Caesars Palace hotel and casino, in Las Vegas. The company said Friday, Jan. 9, it has a majority of the holders of its debt on board with a pre-planned bankruptcy agreement that would reorganize Caesars Entertainment Operating Corp. into two separate companies, one to own casino-hotels and the other to lease them, and cut its existing debt by about $10 billion. (AP Photo/John Locher)

KIMBERLY PIERCEALL, Associated Press

LAS VEGAS (AP) — Financial problems plaguing Caesars Entertainment and its casino empire have the company considering a trip to bankruptcy court, possibly as early as Thursday.

It doesn’t necessarily signal the end of this faux Roman Empire, though.

If all goes according to the company’s plan, drawn up with its most senior creditors, it should be business as usual for customers — its doors will remain open, the slot machines will still sing, chips will rest atop tables.

“Caesars is, in a certain sense, a Nevada version of ‘too big to fail,'” said Michael Green, a history professor with the University of Nevada, Las Vegas.

It’s still a gamble.

U.S. casino-hotel companies are dependent on extra cash in a person’s pocket, but perhaps none more than Caesars, which waded into the recent economic downturn already burdened by more debt than any of them — a by-product of a buyout in January 2008 that was largely a wager using other people’s money.

While competitors found fortune in Asia’s casino growth as stateside gambling in Las Vegas and Atlantic City waned, Caesars missed out. And as other companies built arenas and shopping districts on the Strip or casino-hotels in newer gambling markets across the country, analysts say Caesars was reluctant to spend.

It went private, then public again to raise cash and created new related companies, shifting its properties from one to another to free them up from the debt cordoned off in one spot, its Caesars Entertainment Operating Co. That’s the company now headed to bankruptcy court.

Regardless of the maneuvers, “the fundamentals were not there to support the amount of debt that they had,” said Keith Foley, an analyst with Moody’s Investors Service.

WHAT HAPPENED

Apollo Global Management LLC and TPG Capital LP did what a lot of private equity firms were doing at the time when money and loans were easy to come by, buying companies with promise — relying mostly on debt — to add to its portfolio. The gambling industry looked promising.

The deal to buy Caesars (then known as Harrah’s) was first announced in 2006 during the heyday of Vegas tourism and development. But the deal didn’t close until January 2008, several months before Lehman Brothers would go bankrupt, shaking the economy to its core. And it was a nearly $30 billion deal with the two firms taking on more than $10 billion of existing debt and relying on several billion more in bonds to pay for the company.

In between, the company had cut about 200 people from its corporate staff. Before the year was done, Caesars was cutting more staff and looking for new cash to make its interest payments.

WHAT NOW

Among its casino peers, Caesars’ empire remains the largest, employing some 68,000 people worldwide at more than 50 casino-hotels, including Caesars Palace on the Las Vegas Strip.

While Caesars Entertainment has seen a steady $8.6 billion or so in revenue since 2009, it’s been outpaced by Las Vegas Sands Corp., which went all-in in Macau, China, and grew every year to post revenue of $14.5 billion in 2013.

Las Vegas Sands made a $2.3 billion profit that year. Caesars lost $2.9 billion.

Caesars has lost money each year for the last five years.

Still, the company unveiled its High Roller observation wheel and newly renovated hotels on the Strip: The Linq and The Cromwell. It hired headliners for shows at The Colosseum inside Caesars Palace.

All the while, it was shifting and shuttering other assets.

Last year, the company closed properties in Atlantic City, London and Mississippi and said it would cut its global workforce by less than 1 percent.

“They’re going to have to become a little leaner,” said Chris Jones, an analyst for Union Gaming Group. He added that he doesn’t expect any more properties to shut down and expects the plan will free up Caesars to reinvest where it hasn’t, including the gambling floor.

WHAT’S NEXT

The company faces irked creditors, a few who have tried to force the casino giant into bankruptcy against its will this week. Others have sued, claiming the company ransacked Caesars Entertainment Operating Co. of most of its valuable assets. Caesars called the claims meritless and alleges some of its holdout creditors are hoping for the company’s demise in order to win wagers predicting as much.

Despite the acrimony, the company says that after months of negotiations it has more than 60 percent of the holders of its first-priority debt on board with its plan.

The plan would shed $10 billion in debt from its weighed-down operations division, leaving it with $8.6 billion and winnowing its annual $1.7 billion in interest payments to $450 million. Senior creditors who OK’d the plan would get cash and new debt to make them whole.

Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Activism

African American Sports & Entertainment Group (AASEG) helps support 25th annual turkey drive in East Oakland

Assembymember Mia Bonta said,”I am excited and fully in support of the City Council’s decision to prioritize an African American-led, Oakland rooted, development group to negotiate how we can reimagine the Coliseum site. This represents a promise of development without displacement, and amenities and entertainment that East Oakland once had and deserves again. This is also the kind of community-led, wealth building opportunity l will fight for at the state level, and I will continue to support initiatives like these here in the 18th Assembly District.”

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The African American Sports & Entertainment Group came out to support the 25th annual Community Giving Foundation Turkey drive at Verdese Carter Park in East Oakland.

Hosted by founder and organizer Marlon McWilson, the turkey drive that started in 1997 has now donated over 35,000 Turkey’s through McWilson’s foundation. In attendance were Oakland Police Chief LeRonne Armstrong, Oakland PAL, California Assembly Member Mia Bonta (AD-18) along with husband and Attorney General for the State of California Rob Bonta. Assembly Member Bonta also congratulated the AASEG on their recent unanimous 8-0 approval to enter negotiations with the City of Oakland on an Exclusive Negotiating Agreement (ENA) to purchase the city’s half interest of the coliseum land, and looks forward to working with the team.

Assembymember Mia Bonta said,”I am excited and fully in support of the City Council’s decision to prioritize an African American-led, Oakland rooted, development group to negotiate how we can reimagine the Coliseum site. This represents a promise of development without displacement, and amenities and entertainment that East Oakland once had and deserves again. This is also the kind of community-led, wealth building opportunity l will fight for at the state level, and I will continue to support initiatives like these here in the 18th Assembly District.”

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California Moving into Next Budget Year With a $31 Billion Surplus, Analysts Say

“Under our current law and policy approach, we estimate the general fund revenue will reach $202 billion in the budget year and result in a surplus of about $31 billion for that budget year,” said Gabriel Petek, legislative analyst of the State of California, referring to LAO’s projections for fiscal year 2022-23.

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California has the strongest economy of any state in the country with an estimated Gross State Product of $3.0 trillion. If it were a country, California would be the fifth-largest economy in the world.
California has the strongest economy of any state in the country with an estimated Gross State Product of $3.0 trillion. If it were a country, California would be the fifth-largest economy in the world.

By Tanu Henry, California Black Media

California is expected to move into the next fiscal year, which begins July 1, 2022, with a whopping $31 billion surplus, according to estimates from the independent Legislative Analyst’s Office (LAO).

The LAO announced the anticipated surplus during a news briefing last week.

“Under our current law and policy approach, we estimate the general fund revenue will reach $202 billion in the budget year and result in a surplus of about $31 billion for that budget year,” said Gabriel Petek, legislative analyst of the State of California, referring to LAO’s projections for fiscal year 2022-23.

Petek said the large surplus reflects a number of trends. Among them are surpluses in the state current operating budget, money left in the economic reserve from the last fiscal year, higher revenues than projected for the last two years, etc.

“Revenue collections have grown rapidly in recent months, coming in over $10 billion ahead of budget act expectations so far this year. Underlying this growth is a meteoric rise in several measures of economic activity,” LAO report reads.

That windfall in the state reserve could mean a rebate for taxpayers or more money for education and other public spending.

State spending is expected to reach a cap set by California voters through a ballot measure in 1979 called the Gann Limit. When that happens, the state is compelled to return money to taxpayers by lowering taxes, sending out rebates or spending money on education.

Salena Pryor, president of the California Black Small Business Association (BSBA) says she is encouraged by the investments the state has made to aid small businesses and to improve the overall economic outlook for Californians most impacted by the pandemic.

She hopes the state will use monies from the surplus to sustain some of its initial investments.

“There is still a lot more work to do. Forty-one percent of Black small businesses have closed permanently due to COVID-19, so further investments into start-ups and restarts would greatly benefit our community,” she said.

California has the strongest economy of any state in the country with an estimated Gross State Product of $3.0 trillion. If it were a country, California would be the fifth-largest economy in the world.

“California has no peers – continues to have no peers. We are world-beating in terms of our economic growth,” said Gov. Gavin Newsom, speaking at the California Economic Summit earlier this month.

“In the last five years, no western democracy has outperformed the state of California. The United States has not… Germany, Japan, the U.K… no other western democracy has outperformed this state in our economic output of 21% GDP over the last five years.”

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Activism

New California “Strike Force” Gives Teeth to State Housing Laws

California Attorney General Rob Bonta said that California’s 17 million renters spend a significant portion of their paychecks on rent, with an estimated 700,000 Californians at risk of eviction. High home purchase costs — the median price of a single-family home in California is more than $800,000 — have led to the lowest homeownership rates since the 1940s.

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The Housing Strike Force will address the shortage and affordability crisis by enforcing state housing and development laws in the attorney general’s independent capacity and on behalf of the DOJ’s client agencies.
The Housing Strike Force will address the shortage and affordability crisis by enforcing state housing and development laws in the attorney general’s independent capacity and on behalf of the DOJ’s client agencies.

By Antonio Ray Harvey, California Black Media

To advance housing access, affordability and equity, California Attorney General Rob Bonta announced earlier this month the creation of a Housing Strike Force.

The team, housed within the California Department of Justice (Cal DOJ) has been tasked with enforcing California housing laws that cities across the state have been evading or ignoring.

The strike force will conduct a series of roundtables across the state to educate and involve tenants and homeowners as the state puts pressure on municipalities failing to follow housing rules and falling short of housing production goals set by the state.

“California is facing a housing shortage and affordability crisis of epic proportion,” Bonta said. “Every day, millions of Californians worry about keeping a roof over their heads, and there are too many across this state who lack housing altogether.

“This is a top priority and a fight we won’t back down from. As Attorney General, I am committed to using all the tools my office has available to advance Californians’ fundamental right to housing.”

The Housing Strike Force will take “an innovative and intersectional approach” to addressing the housing crisis, focusing on tenant protections, housing availability and environmental sustainability, housing affordability, and equitable and fair housing opportunity for tenants and owners.

Bonta also launched a Housing Portal on the Cal DOJ’s web site with resources and information for California homeowners and tenants.

The strike force will enlist the expertise of attorneys from the Cal DOJ’s Land Use and Conservation Section, the Consumer Protection Section, the Civil Rights Enforcement Section, and the Environment Section’s Bureau of Environmental Justice in its enforcement efforts.

“California has a once-in-a-generation opportunity to address its housing crisis, thanks to the historic $22 billion housing and homelessness investments in this year’s budget. But it’ll only work if local governments do their part to zone and permit new housing,” Governor Gavin Newsom said. “The attorney general’s emphasis on holding cities and counties accountable for fair housing, equity, and housing production is an important component to the state’s efforts to tackle the affordability crisis and create greater opportunities for all Californians to have an affordable place to call home.”

According to the National Association of Real Estate Brokers (NAREB), the level of Black ownership nationally has decreased below levels achieved during the decades when housing discrimination was legal.

The 2020 census reports that there was a 29.6% gap between homeownership rates for African Americans and whites. Homeowners accounted for 44.6% of the Black population as compared to 74.2% for whites.

“Blacks have made little, if any, strides at closing the homeownership gap. Systemic discriminatory regulations and policies continue to thwart any meaningful effort at increasing Black homeownership,” Lydia Pope, NAREB’s president, said.

In California, the DOJ reports that over the last four decades, housing needs have outpaced housing production. It has caused a crisis that stretches from homelessness to unaffordable homes.

Despite significant effort, the DOJ stated that California continues to host a disproportionate share of people experiencing homelessness in the United States, with an estimated 150,000 Californians sleeping in shelters, in their cars, or on the street.

Bonta said that California’s 17 million renters spend a significant portion of their paychecks on rent, with an estimated 700,000 Californians at risk of eviction. High home purchase costs — the median price of a single-family home in California is more than $800,000 — have led to the lowest homeownership rates since the 1940s.

Due to decades of systemic racism, these challenges have continuously and disproportionately impacted communities of color. For example, Bonta said, almost half of Black households in California spend more than 30% of their income on housing, compared with only a third of White families.

In addition, less than one in five Black California households could afford to purchase the $659,380 statewide median-priced home in 2020, compared to two in five white California households that could afford to purchase the same median-priced home, the California Association Realtors (CAR) said in a February 2021 statement.

The percentage of Black home buyers who could afford to purchase a median-priced, existing single-family home in California in 2020 was 19%, compared to 38% for white households, CAR stated.

“Just as the price for a single-median home reaches a new record of more than $800,000 in California, everywhere you look, we are in a housing crisis,” Bonta said during the virtual news conference on Nov. 3.

“Among all households, one in four renters pays more than half of their income on rent.”

The Housing Strike Force will address the shortage and affordability crisis by enforcing state housing and development laws in the attorney general’s independent capacity and on behalf of the DOJ’s client agencies.

Earlier this year, Newsom signed Assembly Bill (AB) 215, enhancing the attorney general’s concurrent role in enforcing state housing laws.

AB 215 was designed for reforms, facilitating housing development and combating the current housing crisis.

Newsom also signed Senate Bill (SB) 9 and SB 10 in September, legislation designed to help increase the supply of affordable housing and speed up the production of multi-family housing units statewide.

Authored by Senate President Pro Tem Sen. Toni Atkins (D-San Diego), SB 9 allows a homeowner to subdivide an existing single-family residential lot to create a duplex, triplex, or fourplex.

In response to SB 9, homeowner groups have formed across the state to oppose it. The groups are citing challenges they anticipate the law will bring to their communities, from garbage collection to increased risk of fires.

Livable California, a San Francisco-based non-profit that focuses on housing, is one of the groups that opposes the new laws.

“Senate Bill 9 ends single-family zoning to allow four homes where one now stands. It was signed by Gov. Newsom, backed by 73 of 120 legislators and praised by many media. Yet a respected pollster found 71% of California voters oppose SB 9,” the Livable California website reads.

“It opens 1.12 million homes in severe fire zones to unmanaged density — one-sixth of single-family homes in California,” the message continues. “SB 9 could reshape, in unwanted ways, hundreds of high-risk fire zones that sprawl across California’s urban and rural areas.”

But Newsom says the laws are urgent and overdue.

“The housing affordability crisis is undermining the California Dream for families across the state, and threatens our long-term growth and prosperity,” Newsom said in a Sept. 16 statement.

SB 10 was designed for jurisdictions that want to opt-in and up-zone urbanized areas close to transit, allowing up to 10 units per parcel without the oversight of the California Environmental Quality Act (CEQA).

“Passing strong housing laws is only the first step. To tackle our severe housing shortage, those laws must be consistently and vigorously enforced,” said California State Sen. Scott Wiener (D-San Francisco), chair of the Senate Housing Committee. “I applaud Attorney General Bonta’s commitment to strong enforcement of California’s housing laws.”

The Housing Strike Force encourages Californians to send complaints or tips related to housing to housing@doj.ca.gov. Information on legal aid in your area is available at https://lawhelpca.org.

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