4 Cautionary Tales of Business Debt in Las Vegas
[Guest Post]
Las Vegas is known for its crazy tales of casino gambling, but what about its debt? These various tales of Nevadan debt should act as a cautionary tale.
Debt is rife in every country, state, and county, and these days most individuals have a debt of their own. Be it student debt or a mortgage, we’ve all made sacrifices to get where we are today.
In Las Vegas, we hear countless stories of gamblers taking things too far. That said, what about the aftermath of these tales? How do businesses and individuals recover from their debts?
Although many situations don’t get bad enough to warrant the last resort of a winding up petition, the stories are still pretty shocking to read about. In this article, we’ll be taking you through four of the most shocking debt stories of Nevada. Hopefully, they’ll act as cautionary tales to help you plan your finances…
- Caesar’s Palace Messy Debt Story
In 2008, Harrah’s Casino had been taken over by Apollo Global Management and TPG in a $31 billion buyout. Later renamed Caesars Entertainment, a 31 percent premium was paid for the casino giant due to the knowledge that casinos had done well in previous recessions.
However, all wasn’t as it was predicted, and the financial sector avoided Nevada throughout this time period, making things far worse than ever before for the casino sector. Cut to 2015, and Caesar’s Entertainment’s $24 billion debt led them to file for bankruptcy.
According to the Financial Times, “the Caesars bankruptcy has been one of the nastiest corporate brawls in recent memory.” The debtholders even accused the private equity firms responsible for “unimaginably brazen looting”. Some even blamed the firms for siphoning the best elements of Caesars to other entities they owned, saving all the money for themselves.
Of course, a lot of this is speculation, but it’s still known to be one of the hairiest stories of debt to date. Visitors to Las Vegas casinos are on a steady incline, and this is the case every year, so there’s no doubt that the gambling giant will recover.
- Las Vegas Sands Luxury Resort Hotel Debt
Las Vegas Sands’ 2020 financial statement showed that their total debt was $13.84 billion, with $13.77 billion being long-term debt and $71.00 million being current. That’s an almost unthinkable amount of money and certainly demonstrates the blight that COVID-19 had on Las Vegas businesses.
What’s important to note here, however, is that not all debt is necessarily bad. In fact, short-term debt acts as financial leverage and often indicates a company that is investing in their growth year on year.
For Las Vegas Sands, the current debt is any money due within a year and demonstrates a fair amount of investment on their behalf. So, although billions of dollars in debt might sound catastrophic, the case is not always what it seems on the service to a novice.
- Boyd Gaming Selling of Debt
A recent article claims that Boyd Gaming is selling $900 million worth of corporate debt, demonstrating that gaming companies “are easily able to access capital in the wake of the coronavirus pandemic”.
This is an act of debt consolidation: selling off the debt to a different lender with lower interest rates, providing a longer time to pay off the debt.
In general, this is a very smart move. Consolidating debt to one lender who can provide this low-interest rate keeps overall costs down and makes things far easier to manage. It also allows companies to boost their credit rating if they can be seen to be paying off debts.
- Mountains of Student Debt
Did you know that the collective figure of federal and private student loan debts for Nevadans is a whopping $8.58 billion? Although true numbers are limited, the office of Federal Student Aid says that the figure of student borrowers in Nevada exceeds 302,600. If we include those who take out private loans, the number is most likely far greater.
These figures certainly show how extensive this debt is, but what about on an individual level? For individual Nevadan graduates who studied a four-year college degree, they owe an average of greater than $22,000 in student loans, each. This may be one of the lowest in the country, but we can’t deny that this is still a huge amount for most citizens.
There are plenty of stories from that current victim of this debt, some of which we’ll summarise here:
- 57-year-old, Teresa, headed back into education due to inflation, but is now unemployed with a 23-year-old son who has put off his own education due to seeing his mother’s stress of paying back her $50k student loan.
- Trebor’s student debt started with a for-profit school which closed a year after he left, due to fraud. Because he’d already left, his debt was not forgiven, so he had to declare bankruptcy. After attempting to gain more education to be more employable, he remained unemployed, lost a house, and is now working towards a low-paying teacher job to make ends meet.
- Pat started off with a grant for their education, but this was revoked, so they had to rely solely on student loans, whilst expecting to pay medical insurance to attend. They are now having to go to graduate school to defer on the loans and get qualified enough to get a job to pay them back.
This just goes to show how the system seems to be failing a lot of poor students looking to become qualified enough to get a good job to pay back their loans. On top of this, we can’t forget about the dodgy dealings and scams that students are often victims of, further adding to this debt problem.
Debt Isn’t Always a Bad Thing…
As you can see, on the surface, Las Vegas has plenty of debt to go around. Although some of this debt is more catastrophic than others, it’s clear to see how debt is often used as a means to boost business equity and credit.
That said, many of these businesses have financial advisors who can help them navigate these muddy waters. For the individuals, it’s not always so simple, and the above stories of student debt demonstrate just that. It’s important to be sensible with your own money without the same leverage these businesses have.