By: Ben McLannahan in Las Vegas
Selling 17% holding in Red Rock Resorts would provide boost for troubled lender
Deutsche Bank is preparing to cash in on a $400m stake in a Las Vegas gaming group, giving the bank a boost at a time of lingering concerns over the state of its balance sheet.
In a prospectus issued last week, Red Rock Resorts, operator of more than a dozen casinos across Nevada and California, disclosed that the German bank planned to sell its entire 16.9 per cent holding.
The announcement came shortly after the expiry of a lock-up period — 180 days on from Red Rock’s initial public offering on Nasdaq.
Such a move could come as a relief to investors, who have been fretting over Deutsche’s ability to withstand persistent losses and hits from litigation, including a multibillion-dollar settlement with the US Department of Justice.
Shares in the bank, Germany’s largest, have rallied from their September lows but are still down about 23 per cent on the year.
A sale of Deutsche’s entire stake in Red Rock could earn the bank gross proceeds of about $440m, according to the closing price on Friday. The bank declined to comment.
Marcus Schenk, Deutsche’s chief financial officer, said on a call with analysts on Thursday that the bank expected to book a profit on its Red Rock stake in the fourth quarter.
He added that the bank was also hoping to complete the sale of Maher Terminals, a New Jersey container-shipping business, to an infrastructure fund run by Macquarie.
“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,” Mr Schenk said.
Red Rock has been a controversial investment for the Frankfurt-based lender, which took a stronger grip on the gaming and leisure group after it emerged from bankruptcy in 2011. JPMorgan Chase, another big lender to the company which converted loans into an equity stake, sold it in 2012.
Last year, a local union of housekeepers, cooks and bartending staff called on Nevada gaming regulators to review Deutsche’s ownership of Red Rock, then known as Station Casinos, in light of the bank’s $2.5bn of penalties to settle charges of rigging global interest rates.
Deutsche’s guilty plea to criminal wire fraud made it an unsuitable owner, argued officials at the Culinary Workers Union, which represents about 60,000 casino employees.
Oaktree and Fidelity, two other big investors in the group, are also selling their entire stakes, according to the prospectus. Their shares represent 3.8 per cent and 6.9 per cent of the total, respectively.
Most of Red Rock’s casinos are aimed at the domestic Las Vegas market, rather than the tourist trade. Earlier this month, the company completed the acquisition of the Palms Casino Resort, a big property about a mile away from the Las Vegas Strip.
The company’s majority owners are Frank and Lorenzo Fertitta, who recently sold Ultimate Fighting Championship for $4bn — about 2,000 times what they paid for it in 2001.
The brothers have had a tougher time with Red Rock; it collapsed in 2009, two years after the pair burdened it with debt in a buyout co-led with Colony Capital.
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