gaming:

Harrah’s extends debt-exchange offer, deadline

Thursday, March 26, 2009 | 9:15 a.m.

Headlines from the Vegas gaming industry

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Harrah’s reports loss, says LV properties hit hard (3-13-09)
Harrah’s announces plan to reduce debt burden (3-4-09)
Strip building boom, buyouts were ill-timed, and many see more pain in ’09 (3-1-09)
Harrah’s wants class-action suit over debt swap dismissed (2-27-09)
Harrah's hit with class-action lawsuit over debt plan (2-16-09)
Harrah’s seeking $740 million from credit line (2-13-09)
Harrah’s makes cost-cutting moves (2-12-09)

Harrah's Entertainment Inc. said today it's extending and widening a debt-exchange offer aimed at reducing its debt load and annual interest expenses.

Harrah's extended the deadline for note holders to exchange their debt from April 1 to April 8 and said it has removed a cap of $2.8 billion on the amount of new notes it will issue in exchange for the old debt. The hotel-casino operator, based in Las Vegas, didn't specify how much new debt it now plans to issue.

"They are very eager to get as much of that debt to exchange as possible,'' said Deutsche Bank securities analyst Andrew Zarnett, who continues to maintain that within the next year Harrah's will have to restructure because of its massive debt load.

Apollo Global Management and TPG Capital -- the companies that took Harrah's private in a $30.7 billion deal last year -- are also buying up Harrah's debt in a move observers say is aimed at keeping them in control of the company in the event of a bankruptcy filing.

Harrah's said that as of Wednesday, holders of $4.9 billion in certain old notes had tendered their notes for exchange for new notes paying 10 percent interest and due in 2018; up from $4.5 billion announced last week. Another $449 million from another debt offering has been tendered, up from $416 million last week. In all, holders of $5.4 billion in bonds, or 63 percent of the eligible debt, have tendered their debt in exchange for new notes. Because the debt is selling at a discount, Harrah's can reduce its total indebtedness by buying the existing debt at less than face value.

Harrah's didn't say why it extended the deadline and removed the $2.8 billion cap, and company officials are not commenting on the debt-exchange deal.

The company, which reported total debt of $24.5 billion as of Dec. 31 and paid $1.7 billion in interest and other debt expenses last year, may struggle to make future interest payments because the recession has reduced business at its casinos and hotels.

The company, with 80,000 employees and 53 casinos in six nations, said March 13 that in the fourth quarter of 2008, revenue fell 13.3 percent from the 2007 quarter to $2.28 billion and cash flow declined 23 percent, from $622.8 million to $478 million.

Its big Las Vegas operations were hit particularly hard as revenue fell 20.3 percent to $721.4 million and cash flow fell 33 percent, from $284.6 million to $189.6 million.

Harrah's said that in 2008, its Las Vegas revenue fell in part because of room remodeling and remediation projects at Caesars Palace, Harrah's Las Vegas and the Rio -- but didn't specify how much those projects hurt results. The room remodeling wasn't listed as a factor in the fourth quarter, when Harrah's said its Las Vegas properties maintained relatively strong -- but unspecified -- hotel occupancy rates. Harrah's said the Las Vegas properties suffered in the fourth quarter from lower room rates and reduced spending by visitors and a reduction in corporate meetings.

Asked about the remodeling and remediation projects affecting results, Zarnett that in the fourth quarter, "With occupancy down in this town, that would have been a non-issue.''

Steve Green can be reached at 990-7714 or steve.green@lasvegassun.com.

Discussion: 4 comments so far…

By neiman1

3/26/09 at 9:52 a.m.

Suggest removal

If MGM city opens with 12,000 new jobs, doesn't that just guarantee the jobs at Harrah's will be lost?
By 2zero

3/26/09 at 10:14 a.m.

Suggest removal

City Cemetery is not going to open...

City Center will have a "understated" soft opening and Alan "PR" man will spin the plan for "staged" openings of the massive mess!

MGM will sell properties on its way to keep City Center, Harrahs will hold its assets. When the dust settles Harrahs will prevail and MGM Mirage will fail.
By kenodave

3/26/09 at 1:43 p.m.

Suggest removal

Seems fatboy, Gary Loveman is doing everything in order to protect his $37 million dollar paycheck. No more employees to cut, so onto the bondholders to extract concessions to keep his bonus afloat.
By aml1648

3/27/09 at 6:47 p.m.

Suggest removal

Harrah would have been just fine had it not been bought out by the two private equity funds, which caused the company to load up huge amount of debts.

Now the same two funds are buying up the debts, presumably with huge discounts, to maintain their control of the company in case it goes bankrupt.

Those PE folks surely know how to take care of their own interest, as opposed to the interest of the companies they took over, such as Harrahs.

Having said that, I believe a debt exchange is much more likely to happen here than at the MGM MIRAGE. At least Harrahs does not have any major capital expenditure right now, so its only problem is the interest payments. MGM, on the other hand, is still 800 million dollars short of the Citycenter fundings. Now that Dubai has quit, it must pick up all the slacks on its own.