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Harrah's Entertainment Plan to Issue $720 million in
Secured Notes to Decrease Debt Load has Analysts Split

By Arnold M. Knightly, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Sep. 9, 2009--Harrah's Entertainment is offering investors new notes in an attempt to reduce its $19.3 billion debt load, the company announced Tuesday.

The Las Vegas-based gaming giant plans to issue $720 million in new senior secured notes due in 2017 to buy down a portion of Harrah's existing term loan and revolving credit facility.

The company said in a statement that the eight-year notes will yield 11.25 percent.

The company has $6.3 billion in term loans maturing by 2015 and a $1.1 billion credit facility that matures a year earlier, an August filing with the Securities and Exchange Commission shows.

The gaming company has been aggressively working to reduce its large debt load, the largest in the casino industry, so it can avoid having to file for bankruptcy to restructure its debt.

Harrah's trimmed its debt in the second quarter by 20 percent to $19.3 billion through two exchange offers and a debt paydown. The company swapped nearly $5.4 billion in debt for $3.6 billion in new notes due 2018 during the second quarter. It also paid off $1.3 billion through tender offers or open market purchases and issued $1.4 billion in new notes due 2017.

Bill Lerner, a gaming analyst with Union Gaming Group, said Harrah's has "relentlessly attacked its balance sheet" and provided additional liquidity to the company's bottom line.

But Barbara Cappaert, a bond analyst with KDP Yield, however, said the new offering "does nothing to ease the leverage" of the company and will only push the loan due dates back by two years.

"We are still concerned that the company is highly leveraged," Cappaert wrote in an investors note. "Particularly on secured and second lien debt inherent in the structure."

Harrah's has nearly $501.8 million in debt maturing next year and $168.9 million due in 2011, the company's August filing showed.

The next big hurdle for the company, which owns or manages 53 casinos worldwide, will be a $6.5 billion commercial mortgage-backed securities financing that matures in 2013.

Officials for Harrah's, which is owned by private equity firms Apollo Management and TPG Capital, declined comment on Tuesday.

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


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