Harrah's gets approval to acquire Planet Hollywood

LAS VEGAS, Nevada -- Nevada's top gaming regulator Wednesday called Harrah's Entertainment's pending acquisition of Planet Hollywood Resort "beneficial for the state" because it will keep another hotel property from having to possibly file for bankruptcy.

"The existing Planet Hollywood was headed for some type of restructuring, perhaps a bankruptcy," Gaming Control Board Chairman Dennis Neilander said. "We have some 40 properties that are in our bankruptcy group right now. This will offer a smooth transition for employees that are there and operating the business."

Neilander's comments came just before the three-member board in Carson City gave preliminary approval to the deal that will give Harrah's Entertainment its ninth Strip hotel-casino.

Harrah's paid $70 million to acquire $306 million of Planet Hollywood Resort's debt at a discount between September and December. Harrah's is exchanging the debt with the company's current owners for 100 percent ownership of the property.

Harrah's will provide an additional $30 million for working capital once the deal closes. An approximately $554 million mortgage loan will remain leveraged against Planet Hollywood Resort after the deal is completed.

The transfer of gaming operations is scheduled for noon Feb. 19, pending approval of the deal by the state Gaming Commission on Feb. 18, Harrah's Western Division President Tom Jenkin told regulators.

The property's staff of approximately 2,300 will be reduced by less than 5 percent by eliminating duplications in a few management positions and areas such as call centers, accounting and revenue management, Harrah's Regional President Marilyn Winn told the regulators.

The Planet Hollywood employees will become Harrah's employees and will be eligible to join the gaming company's 401(k) retirement program, she said. Employees will keep their current health plans.

Winn's management team, which also oversees Bally's and Paris Las Vegas, took over the 2,496-room hotel and food and beverage operations on Jan. 16. Harrah's plans to spend $8 million integrating the company's information technology systems, including Harrah's Total Rewards customer rewards system.

Jenkin told regulators that the addition of Planet Hollywood to the company's customer database will reap benefits beyond just the company.

"When we have new offerings put into the mix, we generate business not only for Harrah's Entertainment but the city of Las Vegas and the state of Nevada," Jenkin said.

Harrah's Chief Financial Officer Jonathan Halkyard told regulators that the gaming company became interested in Planet Hollywood last summer after learning the resort was in danger of defaulting on its loan payments.

"We began to (buy the debt) because we felt Planet Hollywood would be a very complementary addition to our portfolio in Las Vegas," Halkyard said.

35-acre property borders Harrah's Paris Las Vegas and Bally's properties. The acquisition will give Harrah's control of all 126 acres on the Strip between Flamingo Road and Harmon Avenue.

The company also owns Caesars Palace, Flamingo, Harrah's Las Vegas, Imperial Palace, Bill's and the Rio.

The licensing agreement also allows Harrah's to brand other casinos with the Planet Hollywood name internationally.

Jenkin said the property's proximity to CityCenter should benefit Planet Hollywood.

A pedestrian bridge over Las Vegas Boulevard connecting the retail center Crystals to the sidewalk in front of Planet Hollywood could be extended to draw people directly into the resort, Jenkin said.

"We think there is a very good opportunity there to capture pedestrian traffic," he said.