Harrah's Debt

Mar 9, 2010 7:08 AM

Harrah’s firms up balance sheet
with $5.5B debt extension

    Harrah’s Entertainment Inc. announced Monday it had reached an agreement with its lenders to extend to 2015 the maturity date on a $5.5 billion real estate loan, a move similar to one revealed last week by MGM MIRAGE Inc. (MGM).
    Currently owned by private equity firms Apollo Global Management LP and TPG Capital, Harrah’s Entertainment has seen its 50 gaming properties affected by the economic slowdown, just as have other major gambling companies.
    However, CEO Gary Loveman insists the company never considered filing for bankruptcy despite a heavy debt load that followed the company’s $31 billion buyout by the two equity companies.
    Loveman pointed out that the owners of Harrah’s are cash-rich and have the ability to meet the company’s financial requirements.
    With this loan extension, the company’s debt pressures will be eased, said Loveman.
    “These revised terms for the CMBS loans represent the culmination of nearly two years of transformative activities that have allowed us to improve our balance sheet substantially,” Loveman said. “We now have even greater financial flexibility as we have extended all of our maturities until 2015 and beyond.”
    The agreement requires that Harrah’s purchase about $124 million face value of CMBS loans for $37 million.
    MGM announced last week that it had extended the maturity of $3.6 billion of debt from October 2011 to February 2014. As a means of generating more cash, the company is planning an initial public offering of its Macau assets sometime in the third fiscal quarter. Also, the company plans to sell $850 million in secured bonds between now and June.
    In another area Monday, MGM’s partner in its CityCenter project in Las Vegas, Dubai World, said it expects to put its debt plan involving $26 billion before its creditors as early as this week.
    The plan has been delayed, said Dubai World, by efforts to accurately value developer Nakheel’s assets.
    Financial news services have suggested that Dubai World’s creditors would “have to take a haircut” by accepting 60 cents on the dollar after seven years. Reportedly there are an estimated 90 banks worldwide involved in the negotiations.