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Arnold M. Knightly

Harrah's moves to restructure debt

23 September 2009

LAS VEGAS, Nevada -- Harrah's Entertainment wants to sell up to $750 million of new term loans under its current credit facility, part of the gaming giant's continuing efforts to reduce its multibillion-debt and improve its ability to expand the company.

Harrah's said Tuesday it would use

the proceeds from the buyback to refinance or retire some of its existing debt.

According the company, $175 million of the proceeds will be used to purchase some of the company's debt maturing in the next two years. The rest will be used for further debt reduction and general corporate spending.

An analyst described the move as an attempt by the company to improve its cash position, but it would still leave Harrah's heavily leveraged.

Barbara Cappaert, a bond analyst with KDP Investment Advisors, however, said the plan will help Harrah's expand.

"The additional liquidity definitely would help bolster spending on new projects, a strategy so clearly prioritized last week with the news that Harrah's was buying Thistledown and Planet Hollywood's distressed debt," she said.

Harrah's last week announced an $89 million agreement to buy the Thistledown horse-racetrack near Cleveland. The acquisition is in anticipation of the legalization of video lottery terminals for certain racetracks in Ohio.

The Review-Journal on Sept. 14 reported that Harrah's has purchased 16 percent of Planet Hollywood Resort's $860 million debt in a possible bid to acquire the Strip hotel-casino. Neither Harrah's nor Planet Hollywood Resort officials would comment on the reports. Multiple sources have said executives from Harrah's Entertainment toured Planet Hollywood Resort last week.

Harrah's has nearly $501.8 million in debt maturing next year and $168.9 million due in 2011, an August filing with the Securities and Exchange Commission showed.

The company has $6.3 billion in term loans maturing by 2015 and a $1.1 billion credit facility that matures a year earlier, SEC filings show.

Harrah's announced on Sept. 8 that it would issue $720 million in new senior notes due in 2017 to buy down a portion of its existing term loan and revolving credit facility. The new eight-year notes will yield 11.25 percent.

Even with all this activity, Cappaert is still wary of Harrah's long-term prospects.

In a blog post on the company's Web site, Cappaert wrote, "The company is just repositioning its balance sheet in the near-term to buy some time. The elephant in the room remains the significant debt already in the capital structure."

Harrah's moves to restructure debt is republished from