Harrah's reduces debt load by $2.3 billion


Harrah's Entertainment reduced its debt load by $2.3 billion in a debt swap program that ended Tuesday, although industry analysts Thursday couldn't determine whether 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 Friday discussing the impact of the company's debt swap on the company's bank covenants and liquidity.

The exchange, which is scheduled to be settled by Wednesday, will mean $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 debt holders 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, as well as 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 officials said in mid-March that the company might not generate enough cash flow or secure additional loans to service its debt.

The world's largest casino company by revenue reported March 17 that revenues last year dropped 10.3 percent to $10.13 billion from 2007. That drove down cash flow 16 percent, from $2.81 billion in 2007 to $2.36 billion last year.

The company paid $2.1 billion in debt expenses in 2008, largely tied to interest expenses on the debt load.

 

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

 

Rules for posting comments

Comments posted below are from readers. In no way do they represent the view of Stephens Media LLC or this newspaper. This is a public forum. Read our guidelines for posting. If you believe that a commenter has not followed these guidelines, please click the FLAG icon next to the comment.