NorthAmericaCreditResearch26March2019CorrectedNote(Seepage21fordetails)CaesarsSale?ICAHNBelieveitCreditImplicationsofaPot'lERI/CZRDeal;CRC5.25stoOW,FavorERI6%'26sUSCreditResearchMichaelPaceAC(1-212)270-6530michael.pace@jpmorgan.comColtonF.Ransom(1-212)834-4684colton.f.ransom@jpmorgan.comJ.P.MorganSecuritiesLLCSeepage21foranalystcertificationandimportantdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.www.jpmorganmarkets.comWe’vegivenapotentialsaleofCaesars(CZR)quitealotofthoughtoverthelastfewweeksgivenCarlIcahn’s(Icahn)recentandmeaningfulpurchasesofCZRequitysincemid-February(~99mshares,oratotalownershipof~120msharesincludingConvertsandForwardcontracts;14.4%stakeonafullydilutedbasis).PressreportshavesuggestedthatCZRmightbesold(WSJ,February14,2019),notablywithEldoradoResorts(ERI)asalikelybuyer,whichwethinkisoneofonlyafewcompanies/managementteamswiththewillingness,confidence,andthemarketcredibilitytopursueatransactionofthissizeandcomplexity.IcahnrecentlygotthreeBoardseats,andwillgetafourthifanewCEOisn’tfound(withIcahn’sapproval)byApril15th.GivenIcahn’sactivistandgamingindustryhistory,wesuspectstrategicalternativesarelikelytobediscussedoverthecomingmonths,whichcouldincludethesaleoftheentirecompany.WhilewethinkERIisthemostlikelybuyer,wesimplydonotthinkanear-termdealimminent.ERIalreadyhasastrongstandalonegrowthstoryandApollo/TPGrecentlysoldtheirentireCZRstake.WewouldbesurprisedtoseeaquicksaleofCZRfollowinganApollo/TPGexit.WealsonoteTomReegcommentsattherecentJPMEquityGamingconferencethatanimminentdealbetweenCZRandERIasreportedinthepressissimplynottrue.Finally,Icahn’sForwardContracts(15mshares)don’texpireuntilMarch11,2020,providingalmostanotheryeartoprofitontheseinvestmentsfromanannounceddeal.Aswediscussinthefollowingreport(amongothert...
