November 22, 2010 - 11:24 am
The first business day after Harrah’s Entertainment canceled a planned $610 million stock sale, the hedge fund controlled by billionaire John Paulson submitted paperwork to the Securities and Exchange Commission that could lead to the sale of his stake in the casino operator.
Harrah’s filed the registration statement Monday for New York-based Paulson & Co. to list up to 7.1 million shares, which is its entire 9.9 percent stake in the Las Vegas-based company. The filing is not an indication of Paulson’s intent to sell his shares, only that the option is now available to the hedge fund.
In the filing, Harrah’s said it would not receive any proceeds from the sale.
Paulson picked up its stake in Harrah’s in exchange for taking on $710.3 million in debt. Paulson bought most of that debt, $532 million, for $354.9 million, nearly two-thirds its face value.
Earlier this year, Paulson’s hedge fund bought nearly 10 percent of MGM Resorts International and nearly 5 percent of Boyd Gaming Corp.
Paulson has said little about his gaming industry investments. Others, speaking for him, have said Paulson is betting on the recovery of Las Vegas. His hedge acquired a stake in real estate developer General Growth Properties, which owns several area shopping malls.
MGM Resorts Chairman and CEO Jim Murren, who knows Paulson from when they were both Wall Street analysts, said this summer the investor told him the prospect of a rebound in the Las Vegas economy was the reason for the investments.
Harrah’s still plans to change its name to Caesars Entertainment. It was unclear from the registration statement when and if Paulson would sell the shares and where they would they be listed.
The company canceled its own initial public offering on Friday due to “market conditions.”
Harrah’s had planned to sell 31.25 million shares of common stock at an estimated price range of $15 a share to $17 a share under the corporate name Caesars Entertainment and under the symbol CZR on the Nasdaq Global Select Market.
Apollo Management Group, led by money manager Leon Black, and Texas Pacific Group, a private investment firm headed by David Bonderman, took Harrah’s private in January 2008 in $29 billion private-equity buyout.
Harrah’s has about $23 billion in long-term debt, but the company has been taking steps to restructure its balance sheet, including issuing new notes to pay off maturing debt.
Analysts said Harrah’s canceled the IPO because investors thought the price was too high and the company had too much debt. Harrah’s planned to use money from the IPO on two casino development projects in Ohio and to complete an unfinished 660-room hotel tower at Caesars Palace. Harrah’s also recently became involved in an effort to save a troubled casino project in Philadelphia.
In a filing last month with the SEC, Harrah’s said its two private-equity owners would retain their controlling interests in the company if the company goes public again.
Revenues for Harrah’s have fallen from a peak of $10.8 billion in 2007 to $8.9 billion last year, an 18 percent decline. In the third quarter that ended Sept. 30, Harrah’s said its net loss shrank to $164.8 million from a loss of $1.62 billion a year earlier.
Harrah’s operates 10 Strip casinos, including Caesars Palace, Bally’s, Paris Las Vegas, Planet Hollywood Resort and Harrah’s, along with the off-Strip Rio. The company is considered the world’s largest casino operator with 53 properties in six countries. Harrah’s also owns the World Series of Poker.
Contact reporter Howard Stutz at firstname.lastname@example.org or 702-477-3871.