The rating provider says the upgrade reflects an expectation for improved leverage for Caesars in 2023 because of reduced digital losses.
A reduction in losses for this segment of Caesars’ operation has been attributed to promotional and marketing spending to attract new customers, and the launch of the operator's digital business in several new states.
Not only this, S&P cites that ongoing recovery for Caesars in Las Vegas should drive its leverage to the 6x upgrade threshold in 2023, despite rising macroeconomic risks in North America.
As a result of this upgrade, S&P has raised the issue-level ratings on the operator’s secured debt to B+ from B.
S&P adds that Caesars’ expected EBITDA growth should provide it with the flexibility to navigate any operating volatility from any economy-wide recession occurring in 2023.
Furthermore, acquisition costs incurred by Caesars are expected to fall, given new market entries are expected to slow in 2023, and that fewer states are expected to launch regulated sports betting during this time.
The operator’s EBITDA losses from its digital segment totalled $112m for the first nine months of 2022, a significant drop in costs for 2021, which totalled $1bn.
This drop in losses will, according to S&P, allow Caesars to further invest in its iGaming offering, increasing revenue and profitability from this segment.
Recently, our sister publication Gaming America discussed the importance of acquisition costs in boosting profitability and client activation.
