From Bankruptcy to the Most Sought Out Regional Gaming Asset in North America
When Clairvest met the management team of Centaur Gaming, the company was under bankruptcy protection. Centaur Gaming was the parent company of the Hoosier Park racetrack and casino in Anderson, Indiana, 35 miles northeast of downtown Indianapolis. The company’s balance sheet was in trouble after it agreed to make a large commitment to the government to obtain slots at the existing horse track. After several other investments did not pen out in other jurisdictions, the excessive investment in Hoosier Park drove Centaur into bankruptcy protection. Clairvest recognized that despite the broken balance sheet, Centaur Gaming possessed many attractive characteristics that Clairvest looks for in a gaming opportunity, including a highly talented management team that had a strong track record in the industry (despite the recent challenges). Clairvest bought a controlling position in the senior secured debt of the business over time and supported the existing management team through and out of the bankruptcy process.
After Clairvest’s purchase of the senior debt in 2010 and upon Centaur’s emergence from bankruptcy, Indiana Grand, the second casino in the Indianapolis market also filed for bankruptcy protection in 2011 with similar issues around large historical commitments. At the same time legislators lifted the prohibition of one entity owning both racetrack operations in Indiana. As a result, Centaur was able to purchase the Indiana Grand property out of bankruptcy and bring both properties under one ownership. This was a significant step for Centaur, which now controlled both racetracks in its market. EBITDA grew from US$40M to over US$140M as result of synergies from the amalgamated operations, continued growth in the market and further legislative reforms. The significant EBITDA growth and debt reductions from successful refinancing of the debt, created significant value for the owners of Centaur.
“Partnering with Clairvest was a life changing decision. Despite taking over an asset in bankruptcy, Clairvest never acted in a way that made me feel like they did not have the best interest of Centaur in mind. They acted as true gentlemen in the full sense of the word. Their role in the incredible outcome for Centaur cannot be underestimated.” Rod Ratcliff, CEO of Centaur Gaming
Building an Asset of Strategic Significant
The acquisition of Indiana Grand made Centaur one of the most sought-after gaming assets in the United States. After multiple solicitations for sale from large gaming companies, Centaur Gaming was sold to Caesars Entertainment for an enterprise value of US$1.7 billion. The sale price implied a trailing EBITDA multiple of over 12x, a significant premium to trading multiples in the regional gaming industry, thanks to Centaur’s highly attractive features. The investment resulted in a multiple on capital invested of 11.3x and a 30% IRR on a USD currency basis and over 14x multiple on a Canadian currency basis.