Apollo management is one such company that is looking to capitalize on opportunities that are currently made available in the casino industry. Fontainebleau is a casino property that currently sits in bankruptcy court under piles of paperwork, therefore making it a likely candidate for acquisition by a company looking to start their own casino brand.
To purchase an existing casino at a much lower rate would be the ideal way to open up a business, especially one that is so technologically advanced. The economy provides a good time to purchase these properties and reopen them with minimal cost to the investor.
The plan for the investors has now gone from buying shares or equity with in the casino industry to purchasing chunks of debt to help bail the casino property out and prevent them from entering bankruptcy court. If enough companies support the casino by buying out debt they will then own portions of that casino as part of an investment for future revenue generating purposes.
Share options in equity have become a less viable source for investors as there is no promise of return through the casino properties. Now through partial ownership of the company’s debt, it is the debtors who are first repaid in a bankruptcy filing. Therefore by purchasing some debt they are guaranteeing themselves a cut of the money if things turn sour. This also gives those who hold the majority of the debt the most power and decision-making processes especially over creditors when dealing with bankruptcy.
We have seen this happen with many casinos already as Harrah’s entertainment purchased debt from Planet Hollywood Casino’s therefore giving Harrah’s some stock in the company. In the event that Planet Hollywood Casino’s need to file for bankruptcy, Harrah’s will capitalize on their mounting debt and utilize their current money to add on to the city center using the pre-existing Planet Hollywood structure.
