David McKee

Do the bondholders of Harrah’s Entertainment ever get tired of being played for suckers? After being asked to take haircut after haircut — whether in the form of distressed buybacks or deferred repayment — comes a new indignity. While Harrah’s lacks the wherewithal to make its own debtors whole, it somehow has the capability to acquire the debt of Planet Hollywood. This would remove one more obstacle from the path CEO Gary Loveman‘s dream of a Strip empire bridging nearly everything from the Venetian to MGM Grand.

Perhaps it’s the consequence of too much time spent in Caesars Palace, but Loveman’s ambitions increasingly bespeak a Caesarian grandiosity untethered to reality. He can’t afford to finish the Octavius Tower at Caesars (above), couldn’t spring for a relatively cheap casino in Kansas, has put his Biloxi project on indefinite hold, can’t bother to repaint the peeling Rio … but an acquisition of Planet Ho that could cost as much as $870 million? That’s somehow priority #1. Since Loveman sits atop a corporate board otherwise populated by private equity drones from Apollo Managment and Texas Pacific Group, neither of which has demonstrated a whit of perspicacity where the casino industry is concerned, there’s evidently no restraint on his reign of error.

For the record, Apollo’s Leon Black is the crown prince of private equity excess and stupidity, the proud overlord of eight defaulted acquisitions and five more non-performing ones — 65% of his portfolio. And, thanks in large part to Loveman and Black, Harrah’s life expectancy is now described as “limited at best.” Heckuva job, Blackie.

Whether or not one disagrees with MGM Mirage‘s decision to go all in on CityCenter, it’s part of a larger, (mostly) defensible strategy that encompasses all market segments. Loveman, by contrast, appears to be just running loose. Funny that he should cite Planet Ho’s “strong brand name” as a reason for obtaining the joint. Harrah’s owns a sackful of strong brand names and has done little in terms of deploying them. The most obvious case was the Barbary Coast acquisition, which was a gift-wrapped opportunity to plant the Horseshoe flag on the Strip. Loveman whiffed, opting for the generic “Bill’s” moniker instead.

In what may be the “No shit, Sherlock” moment of the decade, Nevada Gaming Control Board Chairman Dennis Neilander told the Las Vegas Review-Journal “Harrah’s financial position also will need to be investigated before a deal is approved.” Ya think? Over $19 billion in debt and it wants to extend its oligopoly on the Strip? Yeah, I’d say that “will need to be investigated.” But don’t expect much from Nevada’s see-n0-evil excuse for regulatory oversight, even with regard to a company whose “capital structure appears unsustainable.”

Besides, while it would lovely from Harrah’s to own every blessed acre betwixt Flamingo Road and Harmon Avenue, the company is anywhere from five to 10 years away from doing anything with its massive Vegas holdings … and has a raft of other unfinished business, besides. (Don’t forget the street of stores leading to a Ferris wheel behind the Imperial Palace.) The vast wasteland of vacant, idle scrubland extending from the Monorail to Koval Lane, behind the IP, O’Shea’s, etc., is stark testimony to the consequences of Loveman’s outsized ambitions. If you thought the Great Recession might produce a chastened leadership style at One Harrah’s Court, think again.

A previous victim of Harrah’s is having hard times, too. Back when Becky Behnen‘s business methods proved too unstable for even the Control Board to overlook, it forcibly shuttered the-then Binion’s Horseshoe. Harrah’s was a temporary savior, providing a cash infusion and managerial oversight, on a short-term basis. But such salvation came at a high price, namely the forfeiture of the Horseshoe brand name and the appropriation of the World Series of Poker.

Eventually, the now-Binion’s Gambling Hall passed into the hands of Four Queens owner Terry Caudill. The latter made a good start on freshening the old gal up and bringing her into the 21st century. Unfortunately, Caudill’s pockets were starting to look a little shallow and the Great Recession has temporarily put paid to his ambitions. Binion’s will limp along with its casino (of course), its handsome new sports book and, of course, its poker room and famous steak house. But forget about playing any keno, patronizing the coffee shop or spending a night there. Thanks to its grandfathered status, Binion’s will be able to take its 365 hotel rooms off line without fear of penalty. It’s also putting 13% of its workforce onto the street. (Sobering afterthought: What does it say if all of Binion’s post-National Finals Rodeo guests and all of the Four Queens’ can be fit into one hotel? Occupancy rates downtown must be horrific.)

There’s no silver lining in this … well, unless you’re Tilman Fertitta and have 500 new hotel rooms (going for $39 a pop, according to LVA). In which case, this might be just the moment to goose those Golden Nugget ADRs. Our subscribers, though, can stay at the Golden Gate for $9.95/night, through Christmas Eve. It’s our way of saying, “Thanks for your support.”