Harrah’s Entertainment, backed by Apollo Global Management and TPG, is attempting to restructure debt that comes due between 2010 and 2018 to avoid default as it copes with declining revenue.
The Las Vegas-based casino operator, which was acquired by Apollo and TPG in January in a $27.8 billion deal, is offering to replace old notes that are set to mature between 2010 and 2013 with $2.1 billion of new, 10 percent second-priority senior secured notes. The casino company is also offering 10 percent, second-priority senior secured notes due 2018 for old notes coming due between 2015 and 2018.
Harrah’s did not return a call for comment Monday.
Apollo and TPG acquired Harrah’s in January for $17.1 billion, or $90 a share. The deal included $3 billion of equity including $1.3 billion from Apollo. With the assumption of approximately $10.7 billion in debt, the total transaction price was around $27.8 billion.
Since the deal closed, Harrah’s has experienced slumping revenue. The company reported $129.7 million in losses in the third quarter this year, compared to a profit of $244.4 million in the same quarter in 2007.
Over the summer, Apollo marked down its investment in Harrah’s by 25 percent. The investment was valued at $179.5 million on 31 March this year and was marked down to $134.3 million just three months later.
Holders of Harrah’s $1 billion of 5.625 percent senior notes due in 2015, its $750 million of 6.5 percent securities maturing in 2016 and its $750 million of 5.75 percent debt due in 2017 will receive 40 cents on the dollar’s worth of new 2018 notes, according to a report from Bloomberg.
Those that own the company’s $718 million of 5.5 percent notes due in 2010 and its $363 million of 7.875 percent senior subordinated notes due in 2010 will get up to 100 percent on the dollar worth of 2015 notes, the report said. Also, Harrah’s $328 million of 8.125 percent senior subordinated notes due 2011 and its $500 million of 5.375 percent senior notes due in 2013 will be exchanged at a rate of 80 cents and 50 cents of new 2015 debt, respectively.
The Apollo-backed retailer Linens ‘n Things went bankrupt earlier this year and is in the process of being liquidated. The firm told investors in May, when the retailer filed for Chapter 11 protection, that the filing would only minimally affect their returns.
TPG lost its $1.3 billion stake in Washington Mutual in September when the US government seized the savings and loan and sold its deposits and loan portfolio assets to JPMorgan. The firm had invested $2 billion in Washington Mutual in April, but reduced the value of its holdings in the bank to $1.3 billion.