Harrah's files to take over Planet Hollywood

Dec 2, 2009 7:26 PM
by GT Staff |

Confirming months of rumors, Harrah’s Entertainment has filed an application to buy the Planet Hollywood hotel and casino on the Las Vegas Strip.

Harrah’s Entertainment has formed a new subsidiary called PHW Las Vegas LLC in order to purchase the property and filed an application with regulators last week, according to a report in the Wall Street Journal.

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In September, Harrah’s purchased $140 million of Planet Hollywood’s $870 million debt from the Goldman Sachs Group.

According to a November SEC filing, lenders acquired the 2500-room property’s finances after the owners defaulted on the loan.

Dennis Neilander, the chairman of Nevada’s Gaming Control Board, stated that a preliminary time line for regulatory approval for the acquisition has yet to be set and that Harrah’s financial position will be investigated prior to approval.

"We believe Harrah’s is the most appropriate buyer for the property, given the strategic location of the property adjoining its other properties on the Strip," David Katz of Oppenheimer & Co. Inc. said in a note to investors. "Although the company has faced financial constraints, we believe its sponsors would likely support the purchase, which should create value through the operating benefits of Harrah’s systems and royalty program."

Planet Hollywood is currently owned and operated by a company controlled by Robert Earl, the founder of the Planet Hollywood brand of restaurants and hotels.

A joint venture between Earl, Bay Harbour Management and Starwood Hotels and Resorts created Planet Hollywood from the old Aladdin Resort, which the group acquired in 2003.

Since then, Planet Hollywood has had several upgrades and renovations, including creating a façade that is more easily accessible to the Las Vegas Strip, and a new 52-story tower that features 1,200 suites and 28 penthouses.

Planet Hollywood last month reported a third quarter loss of $17.5 million, and also disclosed that its lenders are now in control of its finances.

Harrah’s finances aren’t exactly Triple-A either: the company reported a third quarter loss of $1.6 billion, most of which is attributed to a $1.33 billion devaluation in its assets. Harrah’s is also burdened by a $19 billion debt load related mostly to its privatization, which was led by Apollo Global Management LLC.

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