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January 29, 2015

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Harrah’s seeking $740 million from credit line

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Harrah’s Entertainment Inc. disclosed Friday it submitted requests to tap the remaining $740 million of its $2 billion senior secured revolving credit line -- a move one analyst said indicates financial troubles are deepening at the gambling giant.

The Las Vegas company, owner of Caesars Palace and other well-known properties such as the Flamingo, Bally’s, Paris and the Rio, said it requested the final $740 million "in light of the continuing uncertainty in the credit market and general economic conditions. The funds will be used for general corporate purposes, including capital expenditures.’’

Chris Snow, an analyst at CreditSights, said the disclosure indicates Harrah’s needs to hoard cash in order to meet expenses and that it might be preparing for a prepackaged bankruptcy to reorganize its debt — much like Station Casinos Inc. drew down its credit line before announcing a plan aimed at reorganizing its debt through a prepackaged bankruptcy in which key lenders would agree in advance to concessions.

Harrah’s spokesman Gary Thompson declined to comment on the possibility of a debt reorganization, calling it speculation.

Harrah’s, hit hard like the rest of the gaming industry by the recession, last fall reported having about $24.1 billion in debt — a figure that ballooned in last year’s deal that took the company private. The current amount of debt has not been disclosed. The debt level changed after an exchange offer involving about $2.1 billion in notes late last year.

For the quarter ending Sept. 30, Harrah’s said it lost $129.7 million vs. a profit a year earlier of $244.4 million. Revenue fell from $2.84 billion to $2.65 billion — and if this trend of declining revenue continued through the final quarter of 2008 and through the current quarter, Harrah’s likely would face continued financial pressure to meet its debt obligations.

The company earlier this week said it moved to cut costs by suspending matching contributions to employee retirement plans and cutting the salaries of managers eligible for bonuses.

Also today, as previously disclosed, Harrah’s reiterated it will defer the completion of about 660 rooms in the Octavius Tower expansion at Caesars Palace because of the slow economy.

Other aspects of the project will proceed as planned, including the mid-summer opening of an additional 110,000 square feet of meeting and convention space, three 10,000 square foot villas and an expanded pool and garden area.

The cost of the project, not counting the deferred rooms, is about $681 million.

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