Thursday, March 26, 2009 | 9:15 a.m.
Sun archives
- Harrah’s owners offer to buy outstanding debt (3-19-09)
- Harrah’s expects annual savings of $500 million (3-17-09)
- 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 [email protected].
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