Harrah’s chief stays confident about company

Although some industry insiders and observers have had second thoughts about the wisdom of private equity’s entry into the gaming industry, Harrah’s Entertainment chief Gary Loveman isn’t one of them.

“(Being privately owned) provides an ability to focus on long-term viability and the health of the business,” Loveman said. “(Apollo Management and TPG Capital) bring a lot of resources and a lot of expertise to the company that in a typical independent company setting you don’t have.”

Loveman serves as chairman and chief executive officer of Harrah’s, the largest gaming company by revenue, with more than 85,000 employees and properties on five continents.

Harrah’s is one of two prominent gaming companies — Station Casinos is the other — taken over by private equity groups and larded with debt before the economy sank into recession more than a year ago. When hard times hit, casino companies saw revenues plunge as consumers cut back on spending, trips to Las Vegas and gambling. Companies such as Harrah’s that had loaded up on debt to pay for aggressive expansion projects and buyouts were left struggling to make interest payments.

Harrah’s has reduced its outstanding debt by approximately $3 billion in the past year through a combination of debt-exchange offers. But Barbara Cappaert, a bond analyst with KDP Investment Advisors, recently wrote in a note to investors that Harrah’s, which has more than $600 million in debt maturing next year, is “not out of the woods.”

Peggy Holloway, vice president and senior credit officer for Moody’s Investors Service, wrote last month that Harrah’s may breach some of its debt covenants “within the next 12-month period unless operating results begin to improve from current levels.”

Loveman, however, is confident Harrah’s is well positioned to weather the economic storm through the next couple of years while his company and its private equity owners work through the company’s nearly $24 billion debt load.

“We’re very comfortable with our liquidity,” the 49-year-old Loveman said. “We have a position, with respect to our liquidity, that is quite comfortable (given) our upcoming debt retirements in 2010 and 2011.”

Although Loveman would not discuss whether the company might have to eventually seek to restructure its debt in bankruptcy court, he said that analysts and financial experts “who scrutinize our public disclosures through the first quarter will be confident the stability of the company is significant.”

Loveman insists that although the company’s January 2008 takeover doubled Harrah’s debt from $12.4 billion, going private was still the right move for a company its size.

In fact, he said, being owned by “two deeply resourced partners” in the private equity industry is one of Harrah’s biggest assets during the current economic crisis.

“They are deeply involved in the capital markets activities we’re involved with,” he said “They provide tremendous bandwidth and expertise to those activities on our behalf. They are really world-class in those areas and I lean on them extensively for counsel and advice and competence in those areas.”

And despite the two private equity firms having seats on the gaming company’s board, Loveman said the two firms aren’t involved in the casino company’s day-to-day operations.

What TPG and Apollo have done is buy more than $2 billion in Harrah’s loans to fund cash-for-debt swaps earlier this year.

Because of TPG and Apollo’s financial muscle, Loveman said Harrah’s isn’t at a disadvantage compared with publicly held gaming companies that raise cash through public offerings.

In mid-May, MGM Mirage announced its hopes to raise $1 billion through a public stock offering. Wynn Resorts Ltd. and Las Vegas Sands Corp. have made similar moves in the past year.

Harrah’s announced a similar plan last month to sell $1 billion in new notes that will not mature until 2017 to raise cash to buy back more debt.

“For us, the public market, at this point in our history, it doesn’t bring much to us,” Loveman said. “There hasn’t been anything I’ve wanted to do that I’ve been unable to do because we’re not a public company.”

Loveman said the company also is not following its biggest competitor, MGM Mirage, by offering to sell any of its casinos or land holdings to help reduce debt.

“In the case of MGM Mirage, a process was set up to market specific properties,” Loveman said. “Banks were hired and materials were prepared and delivered to people who might consider participating. We haven’t done anything of that sort. We have no explicit process, we have no advisers maintained to sell any of our assets.”

Harrah’s would, however, entertain offers if a buyer arrives with the ability to purchase an “asset we don’t consider essential to our strategy.”

Loveman, however, said with the current credit markets, it’s unlikely a legitimate buyer would be available.

While Loveman sees his company working its way through the downturn, he acknowledges that it is going to take “a little while” for Strip visitor and revenue levels to return to their record-breaking 2007 and early 2008 levels.

Free and independent travelers, lured by low room rates and airline fares, are still coming to Las Vegas, as are high-end players.

The convention and exposition business, however, has suffered greatly, because of comments made by people he calls “leading political lights in the country.”

President Barack Obama’s admonition that companies that were receiving public bailout money shouldn’t be spending money on trips to Las Vegas, made financial service and publicly traded companies “quite risk-averse” about choosing Las Vegas as a site for meetings, he said.

“The consequence of that loss of that demand is we’re filling rooms that would otherwise be dedicated to those customers with a more value-oriented promotional market,” Loveman said. “That is, to a large degree, why you can go online day and night and see these unbelievably attractive offers coming in from all of us to try to fill these rooms.

“That’s the hole that has to get plugged,” he said. “Then I think you will see the rest of the business firm up.”

He predicts it will be 2011 or 2012 before these institutions and companies feel comfortable enough to begin returning to Las Vegas in significant numbers.

Loveman, who has been CEO for six years, acknowledges that the current economy presents one of his biggest challenges in his 11 years at the company.

But, he said, it has also revitalized him.

“These last few months have been incredibly interesting, incredibly energizing, but at the same time very hard,” he said. “You get up in the morning and, by and large, you face a series of problems all day long. Where as before, you faced some combination of problems and opportunities. You’re doing a series of things that don’t feel very good even though you know intellectually they’re the right action to take.

“It’s taxing. Metaphorically, you feel like you’re leaning into a headwind all day long, every day.”

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

Boyd Gaming planning new corporate campus
Casino operator Boyd Gaming Corp. has filed plans to build a new corporate campus. The plans call for two 10-story office buildings and a six-level parking garage in the southwest Las Vegas Valley. Boyd Gaming operates The Orleans, the Suncoast, downtown's California Hotel and other properties. The new headquarters would be just a mile from its current main office building.
Bellagio Conservatory transformed to celebrate Year of the Pig
The Bellagio Conservatory Team transformed the 14,000 square foot conservatory to commemorate Chinese New Year, the holiday that marks the end of the coldest days of winter. (Rachel Aston/Las Vegas Review-Journal)
CES 2019: Intro uses sound to connect people
Intro, a startup that is part of the Future Worlds Accelerator in the UK, has an app that uses ultrasonic sound to find people and companies nearby.
CES 2019 Video: CES wraps up another year
Time-lapse video of the action at CES 2019 in Las Vegas. (Mat Luschek/Las Vegas Review-Journal)
CES 2019: Create your own beauty products
Beauty Mix by BeautyByMe is a product that lets you create your own cosmetics and beauty products. (Mat Luschek/Las Vegas Review-Journal)
CES 2019: Picobrew’s home brew machine
Picobrew brings automation to homebrewing. (Mat Luschek/Las Vegas Review-Journal)
CES 2019: Surviving CES
What it's like to spend four days working the mammoth tech convention. (Jason Bracelin/Las Vegas Review-Journal)
Haier’s smart home
Haier presented smart home technology at CES 2019.
CES 2019 VIDEO: Foldimate makes laundry day easy
Foldimate has created a machine that will fold your laundry for you. Just feed it anything you need folded and it will do the rest. (Mat Luschek/Las Vegas Review-Journal)
CES 2019: Opte device corrects skin spots
Opte from Proctor and Gamble is a device for correcting spots and freckles from skin. It analyzes the area for spots and then covers them with a serum of matching skin tone. (Mat Luschek/Las Vegas Review-Journal)
Circa hotel-casino in downtown Las Vegas unveiled
Derek Stevens reveals Circa hotel-casino in downtown Las Vegas. He plans open by the end of 2020. (K.M Cannon/Las Vegas Review-Journal)
Circa, new casino coming to Fremont Street
Casino owner Derek Stevens announces his new property Circa, coming to Fremont Street in downtown Las Vegas in late 2020. (Michael Quine/Las Vegas Review-Journal)
Dreenk My Oeno makes wine suggestions
At CES 2019 in Las Vegas, the Dreenk My Oeno tells you all about wine.
Polaroid One Step Plus camera unveiled at CES 2019
Polaroid has moved into the digital age with its One Step Plus camera with Bluetooth. With the connected app, it turns your smartphone into a remote for the camera, along with filters and features.
Amazon is everywhere at CES 2019 in Las Vegas
Seemingly everything works with Amazon Alexa
LG Smart Mirror helps you dress snazzy
LG’s Smart Mirror is less of a mirror but more of an assistant to help get you looking snazzy. It takes your image and recommends clothes for you or matches existing clothes with new clothes, which can be purchased right from the mirror. (Mat Luschek/Las Vegas Review-Journal)
Underwater robots make waves at CES 2019 in Las Vegas
Robosea is a company dedicated to underwater robotics. They produce consumer robots for underwater filming as well as commercial products which can be used for underwater research. (Mat Luschek/Las Vegas Review-Journal)
CES 2019 - Victrola record players spin in Las Vegas
A new spin on an old favorite, Victrola record players are meeting a demand for retro products. The brand is also making furnitures with built-in speakers.
CES 2019: Slamtec robots ready to serve
Slamtec is a robotics company out of China whose goal is to provide solutions for laser localization mapping and navigation. They have created two autonomous robots that can be used in areas such as bars, restaurants and malls. (Mat Luschek/Las Vegas Review-Journal)
Mixologiq drink maker appears at CES 2019 in Las Vegas.
This is the Mixologiq drink maker.
CES 2019: Veritable smart garden
Let’s face it; not all of us have green thumbs. And herbs are particularly difficult to grow, considering their constant need for sunshine. Enter the Veritable smart garden from Exky, which does it all for you. (Heidi Knapp Rinella/Las Vegas Review-Journal)
Bonnie Springs Ranch near Las Vegas being sold to developer
Bonnie Springs Ranch near Las Vegas is being sold to a developer, set to close in March. Bonnie Springs, west of Las Vegas off State Route 159 — next to Spring Mountain Ranch State Park — spans more than 60 acres and was on the market for $31 million. The developer and his project partner are under contract to buy the ranch and plan to chop it up mostly into custom-home lots. The plans includes a 25-room motel, a restaurant and a 5,400-square-foot event barn.
Bone-conduction headphones form Aftershokz
Aftershokz offers bone-conduction headphones - headphones that don’t go in the ear.
CES Happy Hour party at Hangover Suite at Caesars Palace
Conventioneers mingled during the Hardware Massive CES 2019 Happy Hour Bash at The Hangover Suite at Caesars Palace in Las Vegas. (K.M. Cannon/Las Vegas Review-Journal) @KMCannonPhoto
Autonomous Cars and Futuristic Aircraft Rule CES
Day two of CES was dominated by autonomous cars and futuristic aircraft in the North Hall of the Las Vegas Convention Center.
TekNekSavr fights neck problems caused by smart phones
Atiya Syverson invented the TekNekSavr to help fight neck and head problems caused by strains while typing on smart phones. (Mat Luschek/Las Vegas Review-Journal)
New eyeglasses know if you fall and call for help
The French company Abeye has created eye glasses that will detect if the wearer falls and call for help. (Mat Luschek/Las Vegas Review-Journal)
Company that creates vibrator-like device claims genders bias against CES
Lora DiCarlo is a women-run start-up that creates a vibrator-like device designed for female pleasure called the Osé. This year they were awarded the CES Innovation Award in the Robotics and Drone Category, but a month later the Consumer Technology Association, which runs CES, rescinded the award and their booth. Haddock and her team believe it is a reflection of gender bias and sexism in an industry with a long history of male domination.
CES-Wagz has new pet products
Wagz has three new products to help create better lives for your pets in a digital world. One is a collar with LTE tracking and an HD camera. Also a smart pet door that only lets your pet in and out. Lastly, a device to humanely keep Fluffy out of certain areas of your home. (Mat Luschek/Las Vegas Review-Journal)
CES 2019: Varram lats you play with your pet remotely
Varram’s pet robot is designed to let you remotely interact with your real pet. (Mat Luschek/Las Vegas Review-Journal)
News Headlines
Home Front Page Footer Listing
You May Like

You May Like