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Gaming Guru

Arnold M. Knightly
 

Harrah's lowers debt by $2.3 billion

13 April 2009

LAS VEGAS, Nevada -- Harrah's Entertainment was able to reduce its debt load by $2.3 billion in a program that ended Tuesday, although industry analysts Thursday were unable to determine if that will be enough to keep the company out of bankruptcy court.

The gaming giant, which reported a $23.1 billion debt load on Dec. 31, said 64 percent, or $5.6 billion, of the bonds offered in the exchange were tendered by the late Tuesday deadline, a filing with the Securities and Exchange Commission shows.

Bond analysts Thursday said they are examining the exchange details and will begin releasing reports today discussing the effect of the debt swap program on the company's bank covenants and liquidity.

The exchange, which is scheduled to be settled by Wednesday, means $3.4 billion in new 10 percent notes that will mature in 2018 will be issued.

A subsidiary of the company issued an additional $297 million in new notes for $442 million in bridge loans the company repurchased.

Most debtholders who redeemed old notes for new notes or cash, however, held notes that matured in 2015 and beyond. The new debt has a longer maturity date than the debt tenders, and higher interest rates in most cases.

Only $245.8 million in notes maturing through 2013 were redeemed. Harrah's still has $514 million in notes maturing in 2010, and $964.2 million in notes maturing through 2013.

That is the same year a $6.5 billion commercial mortgage-backed securities loan matures. That loan is leveraged against the Rio, Paris Las Vegas, Harrah's and Flamingo in Las Vegas, one property in Laughlin and one in Atlantic City.

This is the company's second exchange offer in the past five months. The earlier debt swap resulted in $2.2 billion in debt being exchanged for $1.1 billion in new notes and cash.

The company's bottom line has been hit hard because of its huge debt load, which largely resulted from the $30.7 billion buyout of Harrah's by Apollo Management and TPG Capital in January 2008.

Harrah's Entertainment said in mid-March that it may not be able to generate enough cash flow or secure additional loans to service its debt.

Harrah's said March 17 that revenues last year dropped 10.3 percent to $10.13 billion. That drove down cash flow 16 percent, from $2.81 billion in 2007 to $2.36 billion last year.

Harrah's lowers debt by $2.3 billion is republished from Online.CasinoCity.com.