{"id":2290,"date":"2010-02-16T16:25:23","date_gmt":"2010-02-17T00:25:23","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=2290"},"modified":"2010-02-16T16:30:41","modified_gmt":"2010-02-17T00:30:41","slug":"harrahs-too-big-to-fail","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/harrahs-too-big-to-fail\/","title":{"rendered":"Harrah’s: too big to fail"},"content":{"rendered":"

\"halkyard\"Take a good look at that fresh-faced man to the left. His name is Jonathan Halkyard<\/strong> and he’s the CFO of Harrah’s Entertainment<\/strong>. If he seems like a kid who’s running up a reckless tab on Dad’s credit card, blame it not on youth (he’s 45) but on a financial strategy that the Sun<\/em>‘s Liz Benston and industry insiders describe in terms that include: “Byzantine,” “reckless,” “curious,” “risky,” “extremely opaque,” as well as, to be fair, “spectacular”. Halkyard’s Job #1 is to pay down — or find creative ways of avoiding<\/em> paying down — $15 billion over the next nine years … plus whatever additional debt CEO Gary Loveman<\/strong> has managed to rack up in the interval.<\/p>\n

So if you’ve been wondering where Harrah’s is getting the scratch to take on Planet Hollywood<\/strong>, possibly build an Ohio<\/strong> racino, expand into Rhode Island<\/strong> and even — if rumors are true — offer $600 million to buy James Packer<\/strong> out of Melco Crown Entertainment<\/strong>, it’s all a matter of Halkyard’s ledger-demain<\/a>. As Benston explains, Harrah’s is meeting its debt schedules, “And yet, it has often paid bondholders millions less than they were owed. Some analysts call this a form of backing out on debts<\/em>.” (S&G<\/em> would call it something considerably less diplomatic.)<\/p>\n

In other words<\/strong>, it’s easy to — as one Wall Street firm put it — be “manufacturing cash flow” if your modus operandi<\/em> includes persuading bondholders to take a Yul Brynner<\/strong> haircut in the form of a dime-on-the-dollar buyback. Of course, if you’re creditor who signed off on that Faustian pact, it must be chagrining to see Loveman lard up Harrah’s with another half-billion in Planet Ho debt or read leaks that he’s supposedly flinging 600 mil at James Packer’s feet.<\/p>\n

Perhaps had these bankers and bondholders not been meant to fleeced, the good Lord would not have made them sheep — but the shears have been working long and skillfully at One Harrah’s Court. And, unlike bankrupt colleagues Station Casinos<\/strong> and Herbst Gaming<\/strong>, nobody has uttered the “F” word (“fraudulent conveyance”) in connection with Harrah’s, even though the blue-sky projections that accompanied its LBO were nearly as hard to believe as Station’s. (Perhaps it’s because the price-to-cash-flow valuation of the Station deal was so preposterous, much more so than Harrah’s was, that the Loveman\/Leon Black<\/strong> cock-up has drawn less opprobrium.) The company still remains overexposed in Atlantic City<\/strong> and Lake Tahoe<\/strong> (despite shuttering teeny-weeny<\/a> Bill’s Casino<\/strong> up there) and has accrued so much Las Vegas Strip<\/strong> acreage it could take decades to recoup the investment.<\/p>\n

\"octaviustowerrendering_011209\"For that matter<\/strong>, were they not secured by real estate (like perhaps the lovely, vacant Octavius Tower<\/strong>, above), we’d say new Harrah’s bonds are scarcely worth the paper on which they’ll be printed. And though they are secured, anybody underwriting Harrah’s management at this point had better have a high pain-tolerance threshold in their wallet. What’s the over\/under on Halkyard announcing a postponement of the maturity on the new notes — or offering to buy them back at distressed rates? It’s worked for Harrah’s before.<\/p>\n

Regarding his 2019 deadline, Halkyard says, “I like our chances that business will recover in that period<\/em>.” Yes, and a stopped watch will be accurate 6,572 times during his timeframe. Saying the casino biz will recover by 2019 is like predicting the sun will rise tomorrow: There’s a chance you’ll be wrong but nobody’s taking odds against you. Still, he can afford a bit of swagger. Harrah’s has got the bond and banking sectors by the short hairs, and they don’t dare force the issue given their level of exposure.<\/p>\n

Who’s too big to fail?<\/strong> Harrah’s, that’s who. For its financiers, bankruptcy is not an option. As Benston puts it, “Although top executives typically lose their jobs and ownership in a company in bankruptcy, the process can wipe the slate clean of debt, enabling it to compete more effectively<\/em>.”<\/p>\n

Sounds good to us.<\/p>\n","protected":false},"excerpt":{"rendered":"

Take a good look at that fresh-faced man to the left. His name is Jonathan Halkyard and he’s the CFO of Harrah’s Entertainment. If he seems like a kid who’s running up a reckless tab on Dad’s credit card, blame … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[23,7,123,96,76,93,71,6,111,57,9,38],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/2290"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=2290"}],"version-history":[{"count":6,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/2290\/revisions"}],"predecessor-version":[{"id":2297,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/2290\/revisions\/2297"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=2290"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=2290"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=2290"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}