Jul. 17, 2003 - Park Place Entertainment Corp. on Wednesday denied analysts' speculation and published reports that it is actively trying to sell less profitable operations in the wake of its announced name change. 

On Tuesday, the company announced plans to rename the company Caesars Entertainment in order to leverage one of the best-known names in gaming. 

If approved at a special shareholders meeting Sept. 10, the change would become effective in January. 

The announcement led many Wall Street analysts to speculate that the name-change decision "could also signal the company's intention to shed several nonstrategic assets." 

Park Place spokesman Robert Stewart, however, dismissed those rumors and suggestions Wednesday. 

"Our properties are not on the market. Anyone who suggests otherwise is guilty of grossly uninformed speculation." 

Some analysts had said the most likely sell-off candidates include the Reno Hilton and Las Vegas Hilton, Belle of New Orleans, Bally's and Sheraton Tunica. 

Others said Park Place also has been getting offers on the Grand Casinos in Mississippi, but no prospective bidders have had sufficient financial backing to consummate a deal. 

"Because we're a well-known company that owns an attractive portfolio of casino resorts, we're often the recipients of unsolicited offers, both to sell and to buy properties," Stewart said. 

Joe Greff, gaming analyst at Fulcrum Global Partners, an independent Wall Street investment research firm, said the major obstacle is that the limited number "of serious offers with financial backing has been few and far between." 

Stewart said: "We have a responsibility to our shareholders to investigate and consider those offers. But none of those offers, either to buy or to sell, has led to any plans to acquire or dispose of any of specific properties." 

Supporting Park Place's Wednesday statements, Deutsche Bank analyst Andrew Zarnett expressed doubts that Park Place would sell the Grand Casino properties, "but they may be rebranded as Caesars." 

"(Park Place President) Wally (Barr) has really redirected the company to re-establish it as one of the great brands in gaming," he said. 

Zarnett said the company's long-term plan includes development efforts, both domestic and international, and changing the names of properties to fit into a Caesars-centric focus. 

"Combined with the name change, the company is going to be leveraging the greatest and best-known name in gaming," he said. 

"Within the scope of that, there are properties that don't fit into the vision. One obviously is the Las Vegas Hilton. Others include the Tunica (Sheraton) property, and the Flamingo Laughlin and the Reno Hilton," Zarnett said. 

Selling such assets would support the redirection of the company and also help it meet its financial goals, analysts said. 

At the name change announcement, Park Place Chief Financial Officer Harry Hagerty said the company is recommitting itself to cutting its leverage, or debt-to-cash flow ratio from its current level of just over 4.5 to four. 

Park Place currently has debt of $4.9 billion and in 2002 had cash flow, generally defined as earnings before interest taxes, depreciation and amortization, of $1.1 billion. 

Also fueling the sales speculation, analysts said off-loading properties that are underperforming or fit poorly with the Caesars brand could raise about $600 million, analysts estimated, reducing the company's leverage to its targeted goal. 

"Considering a lot of properties have more asset value than cash flow, the sales would go a long way to achieving the targeted level of leverage," Zarnett said. 

However, Stewart said, "Park Place generates between $600 million and $700 million a year in cash flow from operations. We don't need to sell any assets to finance our capital investment program, including new hotel towers." 

Deutsche Bank analyst Marc Falcone also said the name change will be a positive move from a consumer standpoint because the Caesars name ripples through the company. 

Falcone said another element of the name change involves plans by Park Place to launch a new branding strategy to "target a younger, hipper demographic." 

"(And) the company also indicated it intends to go to the board for authorization to move forward with a $350 million hotel tower at Caesars Palace, while the property continues to undergo significant renovations," Falcone said. 

"We believe the revitalization of Caesars Palace is having a positive impact on the bottom line, perhaps $200,000 in incremental revenues per day," Falcone said. 

Still, "return on invested capital remains a question mark," Falcone said. 

"We think Park Place continues to move in the right direction, but still remains a long-tern turnaround story," Falcone said. 

Park Place shares closed Wednesday at $8.71, down 9 cents or 1.02 percent for the day and down 39 cents or 4.3 percent since opening Monday.
 
 

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