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Arnold M. Knightly

Harrah's Entertainment exits Slovenia plan

4 April 2008

LAS VEGAS, Nevada -- For the second time in about 30 days, Harrah's Entertainment has decided to pull out of an international project.

The gaming company has suspended talks with Slovenia-based Hit Group about developing a $1.2 billion resort in the Eastern European country because it was unable to reach a suitable agreement on a management contract, Harrah's said.

"It was really coming to an agreement on how we could have management strength and they could have ownership control," said Jan Jones, Harrah's senior vice president of communications and government relations. "We tried very hard, as did they, in trying to find a structure that gave both sides comfort under Slovenian law. We just couldn't get there."

Jones agreed with a statement released by the Hit Group that said: "It was not possible to find a management structure that would fulfill the interest of the Hit Group ... and granting (Harrah's) expected influence in the new joint company."

The casino would have been Eastern Europe's largest, with 1,500 rooms, 2,000 slots, table games, convention and event space, clubs, bars, restaurants and a spa in western Slovenia.

The partnership had been working for three years to get the country's ownership laws changed to allow Las Vegas-based Harrah's to take a 49 percent ownership stake.

Slovenia's Finance Ministry in July began looking at proposed regulatory changes, but only to allow foreign investors to get a 20 percent stake in businesses. It is also considering lowering the country's gaming tax, which is close to 60 percent.

"The government was doing everything it said it would do," Jones said. "Hit and Harrah's negotiating teams looked every way we could to find a management structure that gave them comfort and gave us comfort and we just couldn't get there."

Harrah's also recently withdrew from a proposed $2.6 billion resort project in the Bahamas. Harrah's had a 43 percent interest in a joint venture with Baha Mar Resorts Ltd. and Starwood Hotels & Resorts Worldwide to develop a six-hotel, mixed-use resort.

Although Harrah's is no longer interested in the Bahamas project, Jones said the company could still pursue a management agreement in Slovenia.

"Maybe we could do something in the future," she said. "We just couldn't get a management agreement at this time."

Jones said the timing of the Slovenia and Bahamas withdrawals are coincidental and not cost-cutting measures related to the recent buyout by a pair of private-equity firms.

Harrah's was bought for $17.7 billion by private-equity firms TPG Capital and Apollo Management late last year.

Bond analysts who cover Harrah's could not be reached for comment on Thursday.

Harrah's Entertainment exits Slovenia plan is republished from