Hinges on Meeting Income Targets : Asset Sale Among Options in Caesars’ Proxy

Caesars World, the Los Angeles-based operator of Nevada and New Jersey casinos, conceded Wednesday that it might sell some assets if income projections for its proposed major recapitalization plan are “not substantially realized.”

The possibility was raised in a 220-page proxy statement mailed to stockholders, who are to vote on the plan at a June 12 special meeting.

The company offered the plan, featuring a $26.25-a-share special cash dividend to shareholders, who would still retain an equity interest in a reorganized Caesars World. The company devised the plan in opposing an unsolicited takeover bid of $32 per share from New Jersey investor Martin T. Sosnoff.

The company’s proposed payout would be financed by raising an estimated $960 million of new debt, leaving the reorganized firm highly leveraged.

Caesars’ management had said that one advantage of its proposal over other anti-takeover alternatives was that assets would not have to be sold. But the lengthy proxy, in discussing risk factors, modified that position.

If projections are unmet, it said, the company may be required to refinance a portion of its indebtedness or obtain funds from alternative sources to meet its obligations.

The proxy said one alternative source “may be the sale of assets” but it added that the company does not “currently intend” to sell assets.

It said that “no specific assets have been selected as probable candidates for such sales,” should they occur.

Caesars World owns Caesars Palace and Caesars Tahoe in Nevada and Caesars Atlantic City in New Jersey. It also owns four Pocono Mountain resorts in Pennsylvania, which cater to honeymoon couples.

The proxy said the recapitalization could result in about 11.7% of the company’s stock being owned by management, compared to 2.4% at present. The higher figure is based on the assumption that all incentive grants of stock envisioned by the plan become fully vested.

Trading in the company’s recapitalized stock began Wednesday on a when-issued basis. It closed at $7.375 on the New York Stock Exchange. Added to the $26.25 dividend, that brought to $33.625 the market’s valuation of the proposed recapitalization.