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Posted At : December 1, 2008 04:22 PM | Posted By : D McKee
Related Categories:
Wall Street,Laughlin,Harrah's,The Strip,Atlantic City
It didn't take long for Harrah's Entertainment to swap out 36% of its outstanding debt, at 53 cents on the dollar. In fact, the longer-term, higher-interest notes Harrah's is offering are already oversubscribed, so much so that the offer is being extended through the week.
Some debtholders haven't the stomach for any further involvement with Harrah's and "approximately $286 million principal amount, or 19% of the outstanding principal amount, of Old Notes maturing in 2010 and 2011 have participated in the Exchange Offers and elected to receive cash in lieu of New 2015 Second Lien Notes that they would otherwise receive in the Exchange Offers", meaning that they'll get $209 million -- a 27% writeoff.
The new notes are securitized through Harrah's Operating Co., which means the company has pledged all properties except cash cow Harrah's Las Vegas, The Rio, Paris-Las Vegas, the Flamingo and Harrah's eponymous Atlantic City and Laughlin casinos ... judging from this inscrutable graphic, prepared by a Deutsche Bank investor presentation. (Seriously, I showed it to two people much smarter than I, and neither could make head nor tail of it.)
Somebody forgot to number the footnotes, but "Other" off to the left appears to correspond to the company's captive-insurance subsidiaries. As for "PropCo Borrowing Structure" and "CMBS Borrowers," I'm still working on those. Whoever they are, six casinos are assigned against their debt load. Eccentrically, Paris-Las Vegas and Bally's, whose physical plants are Siamese twinned, are assigned to different debtors. Go figure.
And whoever came up with the acronym for Harrah's Operating Co. (HOC) must have a grim sense of humor. Because if you had to describe Harrah's present condition in two words, "in HOC" would do as well as any and better than most.
Update: Harrah's offering may be oversubscribed but it's not getting the subscribers it needs. Fewer than a fifth of the takers Harrah's found are ones holding notes that mature in 2010-11, debt that CEO Gary Loveman would doubtless dearly love to extend. Covenant Review founder Adam Cohen called the Harrah's tender "not a good showing," explaining that the company "didn't really get the bonds they most wanted."
Update #2: "CMBS," of course, stands for "mortgage-backed securities." Duh!
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