by Hillary LaClair, Senior Editor
March 20, 2009
Because bankruptcy might be eminent for Harrah’s Entertainment, the host of the World Series of Poker, a number of online casino operators are hoping to claim dibs on the major poker event. Harrah’s has already swapped a large amount of its debt for lower value interest notes, and online casino operators think that the WSOP may be one of the many assets that Harrah’s will sell to relieve the debt.
Harrah’s has controlled the World Series of Poker since the company purchased the rights from Binion. The company has never exercised rights to the world’s leading poker tournament online, and rumors are circulation that an online casino carrying the WSOP logo would gain a great deal of registrants and revenue. While Harrah’s has expressed its wish to launch its own online casino once the UIGEA is overturned, its finances may prevent the company from doing so – forcing it to sell the rights.
Selling rights to the WSOP may save Harrah’s from bankruptcy in the end, without having to shut down its numerous hotels and casino resorts. Speculation now is that Harrah’s will be forced to sell its infamous Rio All-Suite Hotel and Casino in Las Vegas.
Harrah’s spokesperson have declined to comment on the company’s financial standing further than that the company is “in a quiet period,” but analysts expect bankruptcy by the end of the year.
“We think this latest restructuring is an attempt to rearrange the deck of chairs on the Titanic,” said bond analyst Barbara Cappaert. “The company will very likely throw in the towel and reduce debt via debt/equity restructuring later this year to streamline its balance sheet.”
She opined that Harrah’s decision to swap its $2.8 billion for notes of $250 million with parent companies Apollo Management and TPG would give Apollo control of “up to $675 million face amount of the December issued debt. This would represent one-third of those new bonds and that, interestingly enough, would be enough to block any restructuring plan in bankruptcy.”
As it is, any online casino looking to expand into the poker market would have the strongest name in the industry with the addition of the WSOP logo. Existing online poker rooms would have a strong lead against rival companies were they to acquire the same.
Bonds with lower priority have not been affected by the debt, with value remaining at 6 cents on the dollar. This is the second time in one decade that Harrah’s as been in danger of bankruptcy, having struggled severely with its debts in 2000, when analysts projected the same outcome. At the time, the debt was estimated at $622.3 billion.
If earning reports follow the same pattern as the most recent quarterly loss of $4 billion, the sale of assets would be vital in keeping the company alive. Gambling websites like Rushmore Casino or perhaps PokerStars would be the first likely to compete for the World Series of Poker rights. While Harrah’s does not want to lose the WSOP, it may not have a choice if it wishes to stay open.