by Hillary LaClair, Senior Editor
April 10, 2009
Harrah’s Entertainment was able to gain a temporary stay of execution this week, reducing its debt load by $2.3 billion in a program that ended Tuesday. Experts are unsure, however, if that amount will be enough to keep the company out of bankruptcy court.
Gaming analyst Barbara Cappaert reported last month that Harrah’s would file for bankruptcy by the end of the year. “We think this latest restructuring is an attempt to rearrange the deck of chairs on the Titanic,” she said.
Harrah’s announced last month that it would swap an undisclosed amount of debt for $2.8 billion in lower value interest notes that would grow in nine years. Apollo Management and TPG Capital, Harrah’s parent companies, have offered to exchange the notes for $250 million, or 37 cents on the dollar for notes tendered by December.
Bond analysts said on Thursday that they are examining the exchange details and will release reports later to discuss the effect that the swap will have on the company’s liquidity. The exchange accounts for $3.4 billion in new 10 percent notes that will mature in 2018 when issued. A subsidiary issued an additional $297 million in notes for the $442 million in bridge loans that the company repurchased. Most of the share holders that exchanged notes held notes that matured in 2015 and beyond. The new debt has a longer maturity date.
Harrah's Entertainment said in mid-March that it may not be able to generate enough cash flow or secure additional loans to service its debt. The company said that revenues last year dropped 10.3 percent to $10.13 billion. This resulted in cash flow decreasing by 16 percent, from $2.81 billion in 2007 to $2.36 billion last year.