Plans by Houston Rockets owner Tilman Fertitta to go public on his Golden Nugget restaurant and casino appear to be on fire on Wall Street, the Post found.
The 63-year-old billionaire casino magnate told CNBC last month that he is looking to list a minority stake in Golden Nugget on a public stock exchange. But Wall Streeters kicking the tires say the debut is not sunk, due to the company’s dizzying $ 4 billion in debt and its drop in sales.
Fertitta did not return calls for comment, but sources say his IPO dreams follow last year’s failed private fundraising efforts.
Before the pandemic hit, Fertitta was quietly buying up to a 49 percent stake in the Golden Nugget franchise, which has five casinos, as well as 600 casual restaurants, including Landry’s Seafood, Bubba Gump Shrimp, Morton’s The Steakhouse, McCormick & The Steakhouse chains Schmick’s and Del Frisco’s, told the Post two sources with knowledge of the situation.
There was some interest in the casino business, but not in restaurants, because Fertitta was looking for a multiple of more than 10 times the winnings, and restaurants, even before the pandemic, were not seen as a growing business, the sources said.
The outlook for restaurants only worsened after the pandemic hit, prompting Fertitta to seek a minority investor only in the casino’s assets. That effort also failed, the sources said.
The problem, the sources explained, is that there seems to be little value in the Golden Nugget other than debt, which is about $ 4 billion – much of it in 2017 to fund a $ 1.4 billion dividend for Fertitta so that he could buy the Rockets for $ 2.2 billion.
Golden Nugget currently generates about $ 400 million in Ebitda – or earnings before interest, taxes, depreciation and amortization, an important financial metric. This results in a 10: 1 debt-to-earnings ratio, a Golden Nugget lender told the Post.
Even if profits in the next 12 months increased to $ 500 million as the pandemic declined, the deal would be worth just nine times its Ebtida, giving little value to shareholders, the creditor said.
There are other companies, like Fertitta’s publicly traded food delivery business, Waitr Holdings, which has proven to be a failure since its blank check company bought it in 2018 for $ 308 million. At the time, the deal raised the stock to more than $ 12.
But Waitr, which closed on New Year’s Eve at just $ 2.78 per share, has since been dragged down by disappointing profits as it lost to bigger competitors like DoorDash and Postmates.
“I don’t think the public markets will accommodate it,” said a bank source who worked on Fertitta’s fundraising efforts. “I think Waitr hurt him.”
Fertitta also released online gaming assets from its casino network last week through Golden Nugget Online Gaming Inc., which has not done well since it began trading on December 30. However, it only traded for two days and closed down 12 percent on its second trading day.
The casino mogul wants IPO money to reduce Golden Nugget’s considerable debt and make new investments, the sources said. “The idea is that he wanted to diversify,” said a banker familiar with his plans.
He has already been successful last year paying himself about $ 300 million in dividends through the Golden Nugget, the sources said. He also refinanced the company so that the principal payment was not due until October 2023.
In January 2020, Fertitta took a $ 200 million dividend from Golden Nugget, later returning $ 50 million to help him survive during the pandemic.
Fertitta’s June deal to go public in Golden Nugget’s online gaming business, however, was structured to let him keep $ 150 million of the $ 745 million paid by the blank check company Landcadia Holdings II to acquire it. , with the rest of the money going to help complete your larger refinancing plan.
Fertitta’s misfortunes come during a difficult period for him as the owner of the Rockets. Tilman reportedly weighed down the NBA team’s payroll as the pandemic continues to crush ticket sales – putting him on the right track to lose about $ 100 million to $ 120 million if fans don’t return this season, according to a sports bench source.
His ties to President Trump have also created a “revolt” among players, with NBA scoring leader James Harden pressing Fertitta to switch him, including the Brooklyn Nets or the Philadelphia 76ers.