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NEWS 1 November 2016

Deutsche Bank to sell $400m stake in Red Rock Casinos

By Caroline Watson
Deutsche Bank is preparing to cash in on a $400m stake in Las Vegas gaming group Red Rock. The Financial Times reports it will give the bank a “boost” at a time of lingering concerns over the state of its balance sheet.

Formerly known as Station Casinos, Red Rock Resorts operates more than a dozen casinos across Nevada and California. It disclosed last week that the German bank planned to sell its entire 16.9% holding.

Deutsche governance controversially invested in the gaming group in 2011 as the operator looked to avoid bankruptcy. The bank agreed to hold around $1bn of its debt as part of a two-year bankruptcy reorganisation.

The Department of Justice is seeking to levy a $14bn fine against the bank which could dramatically affect its cash reserves. Last month Reuters pointed out that the bank’s options for raising this kind of capital are extremely limited.

For months Deutsche has been advised to sell assets in order to free up additional capital. Therefore, it would make sense for Europe’s largest investment bank to sell its position in Red Rock Resorts, as the IPO has performed well, and the lock-up period ends soon.

UNITE HERE Gaming Research analyst, Ken Liu recently highlighted the Banks need for additional cash, adding: “Deutsche Bank investors should certainly welcome the cash infusion and capital boost that can come from selling and existing the casino assets.”

Last week, Deutsche’s Chief Financial Officer, Marcus Schenk reiterated US business news sources prediction that the bank expected to book a profit on its Red Rock stake in the fourth quarter.

He added: “From a de-risking cost point of view, we certainly do expect this to be a quarter that will not be a burden as much as the previous quarters.”
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