Harrah's Entertainment's first day as a private company pretty much lived up to what the company promised two months ago: "a change in ownership, but not a change in direction."
One of the few noticeable changes: the company's stock will no longer be listed on the New York Stock Exchange or other boards after Monday's completion of the $17.7 billion buyout of Harrah's Entertainment by two private equity firms.
However, the company will continue to file quarterly and year-end earnings reports with the Securities and Exchange Commission because public debt financing was used to fund the deal.
Executives with the gaming giant, which is now owned by Hamlet Holdings, a joint-venture between private equity firms Apollo Management and TPG Capital, had nothing to say Monday.
Gary Loveman, Harrah's chairman, chief executive officer and president, and Vice Chairman Chuck Atwood were in meetings all day Monday and could not be reached for comment.
Harrah's shareholders approved the $90 per share buyout deal during a special meeting in April.
Individual shareholders will receive a letter from Mellon Investor Services with instructions on how to redeem their certificates while investors with shares held by brokers, financial institutions or other funds need to contact those groups about redeeming their shares, the company said in a statement.
Although it may be business as usual for the gaming company and its new owners, the banks backing the deal were still struggling Monday to place a majority of the $25.1 billion in debt financing into the portfolios of institutional investors.
Deal underwriters, including Deutsche Bank, Bank of America, JP Morgan, Credit Suisse, have been marketing the financing on a multicity investor road show that started in New York City on Jan. 15.
The banks sold $6.34 billion worth of high-yield bonds Monday morning. However, concerns about the high-risk financing pushed the notes down as much as 10 percent in midafternoon trading.
Wachovia Capital Markets bond analyst Dennis Farrell Jr. said institutional investors are cautious about the offering.
"Until we find out more about how the operating philosophy of the company plays out, there will be a high-risk premium placed on Harrah's for the near term," he said.
Bloomberg News reported the bankers to Apollo Management and TPG persuaded investors to exchange a bridge loan financing the purchase of Harrah's for a portion of $6.34 billion in bonds, according to a person familiar with the matter.
About a third of the high-yield, high-risk bonds went to investors who agreed last year to participate in a loan for the buyout, said the person, who declined to be named because the swap wasn't made public. Banks led by New York-based Citigroup retained the rest, the person said.
Banks have sold leveraged-buyout loans and bonds for as little as 90 cents on the dollar to help reduce a backlog of about $230 billion of debt, according to Bank of America Corp. analysts. Harrah's, the first large LBO financing this year, may make it harder to sell other buyout debt, one analyst said.
"The performance of Harrah's will make people increasingly cautious," Stephen Antczak, a high-yield strategist at UBS AG in Stamford, Conn., told Bloomberg.
Loveman, who will cash out $94 million in stock, will oversee the company's day-to-day operations. He and four representatives from each of the private equity firms will hold the nine board seats directing the company.
Farrell said if the company's revenues slip because of the current market, the company's debt load, which is about twice that of MGM Mirage's, could make it difficult to operate compared with other gaming companies.
The deal's financing is flexible enough to protect the company in a slowdown for projects already in the pipeline, such as a $1 billion expansion of Caesars Palace or a proposed arena behind Bally's.
However, future growth could be hindered if cash flow drops, Farrell said.
Harrah's owns or manages 50 casinos in the United States, including Flamingo, Harrah's, Caesars Palace, Rio, Paris, Bally's, Imperial Palace and Bill's in Las Vegas.
Contact reporter Arnold M. Knightly at firstname.lastname@example.org or (702) 477-3893.