Harrah's files with SEC for initial public offering

Harrah's Entertainment, which went private nearly three years ago in one of the largest private equity buyouts on record, filed documents Monday for a return to the public markets to raise more than $500 million to pay for several development projects, including completion of a hotel tower at Caesars Palace.

In documents filed with U.S. Securities and Exchange Commission, Harrah's said it would sell an unspecified number of shares "to fund a near-term pipeline of growth projects and for general corporate purposes."

It was unclear how many shares of stock Harrah's would be sold and on which market the company would be listed, but the company said it would sell shares "as soon as practicable after this registration statement becomes effective."

Company officials said they could not comment on the filing because of SEC regulations.

One observer thought the initial public offering could raise between $500 million and $1 billion for Harrah's.

The company was listed on the New York Stock Exchange when private equity groups TPG and Apollo Management took the company private in January 2008 in a $29 billion buyout that more than doubled the casino operator's debt load. The firms bought out investors for $90 a share.

Over the past year, Harrah's has taken steps to lower its debt load and interest expenses.

Harrah's said in the filing that Apollo and TPG, the company's largest shareholders, would retain their controlling interest in the company. However, Harrah's didn't give the firms' ownership percentages.

KDP Investment Advisors gaming analyst Barbara Cappaert said in a research note Monday it was unclear if a Harrah's IPO would be successful.

"We have not been a fan of this company, mostly because of the high leverage and the opportunistic exchanges that have not necessarily benefited bondholders," Cappaert said. "However, we are willing to concede that in the right window, more likely 12 months, Harrah's may be able to pull it off. This doesn't mean the post-IPO equity will be a success, just that the company may be able to find a sufficient window to sell and establish a tradable stock."

The move by Harrah's comes less than a week after rival MGM Resorts International unveiled plans to raise more than $517 million through a stock offering of some 40.9 million shares.

Funds from the Harrah's IPO would go toward three projects, including two in Las Vegas.

The Las Vegas-based company said some of the money would be used to build LINQ, a retail, dining and entertainment area between the Imperial Palace and the Flamingo that was first planned in 2006.

In addition, Harrah's wants to complete the Octavius tower at Caesars Palace, which has 660 hotel rooms. The outside of the tower was completed last year but the interior was delayed when the economy slipped and tourism sagged.

Harrah's said completion of the Caesars tower will cost $85 million.

Harrah's is also involved in an Ohio casino joint venture with Dan Gilbert, founder and chairman of Quicken Loans and owner of the NBA's Cleveland Cavaliers. Harrah's would be a minority investor in the project, with Gilbert's Rock Gaming and would operate downtown casinos in Cleveland and Cincinnati.

Harrah's IPO would accompany a planned sale of $710 million in stock the company registered in August on behalf of hedge fund billionaire John Paulson, who struck a deal to acquire nearly 10 percent of the gambling company.

The August prospectus said, "We have not applied to list the common stock on any securities exchange, and we are not required to do so." Although Paulson can exercise the right to demand registration of an underwritten stock offering, "we cannot assure you that we will be successful in our efforts to achieve such a listing," the filing stated.

Earlier this month, Nevada gaming regulators tentatively approved the company's plan to eventually sell stock.

In the filing, Harrah's alluded to recent upswings in Las Vegas tourism numbers. Gaming revenues rose 21 percent on the Strip in August while visitation to Las Vegas has increased or been flat for 12 straight months.

"Our industry is heavily dependent upon both the leisure and business traveler," Harrah's said in the filing. "The trends in both of these areas have turned positive over the past few quarters, as evidenced by increasing hotel occupancy, visitor counts and convention space booking."

Harrah's had long-term debt of $23.3 billion -- one of the highest debt loads in the gaming industry -- as of June 30. Most of the debt is due in 2015 or later. The company assumed $12.4 billion in debt with the Apollo-TPG takeover.

Harrah's operates 10 casinos on the Strip, including Caesars Palace, Bally's, Paris, Planet Hollywood, Harrah's and the off-Strip Rio. The company has 53 casinos in six countries and owns the World Series of Poker.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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Comments

Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

1. PatronAnejo Oct. 19, 2010 | 7:10 p.m. Report Abuse

   Fool me once shame on you. Fool me twice, shame on me. I'll let someone else buy this POS.

2. desertowl Oct. 19, 2010 | 9:46 a.m. Report Abuse

   I do not want to be any where near this elephant when it craps and dies.

3. Ima.tired of the lies Oct. 19, 2010 | 7:32 a.m. Report Abuse

   I like Harrah's, they give me great comps and free rooms for my family & friends when visiting.Yes the rooms are dirty, lamps with no lamp shades, a pile of dirt behind, under the furniture. But when you stay free, who cares. I rather have them there than at my home every-night hauling them back and forth. We meet greet and move on. Expensive in the food category and short on staff for customer satisfaction. I will stay with harrahs, MGM offers nothing, Stations niether.

4. matts7052 Oct. 19, 2010 | 5:03 a.m. Report Abuse

   Let's call this for exactly what it is - Harrah's has run out of options. They have debt swapped 'til they can't debt swap anymore. They have no other option - they have to raise capital and improve their crappy product so they can actually make their debt maturities in a few years (at the ridiculous interest rates to which they agreed). It's merely a band-aid, folks.

5. nine iron Oct. 19, 2010 | 1:13 a.m. Report Abuse

   2.5% is more accurate! Harrahs likes to buy nice properties and minimize every aspect of them. Terrible management!

6. real1 Oct. 18, 2010 | 11:32 p.m. Report Abuse

   Harrahs is the worst thing ever to happen in Vegas- They have casinos and hotels that are dumps and the service at these places are so bad it makes you want to throw up. I have said this before but until Harrah's gets out of Vegas and gaming this place will never be the same or survive. You should take a poll of Harrah's workers and see how many are happy with this company- I would bet 5 percent... help!!!!!

7. VegasDude2010 Oct. 18, 2010 | 1:35 p.m. Report Abuse

   ALso, it's not a IPO if the company has had stock publicly traded for years. This is simply a new issue of stock covering the same old dog.

8. LG Oct. 18, 2010 | 12:45 p.m. Report Abuse

   My entire family has boycotted all of Harrah's properties nationwide! They also tell their friends and they tell their friends and .......! This is how you bring down a corrupt giant, slowly but surely.

9. VegasDude2010 Oct. 18, 2010 | 11:05 a.m. Report Abuse

   Monkey see, monkey do. MGM does it, so here comes Harrah's. Hoping the public will help bail out their pathetic mis-management. Go ahead morons and buy some of this stock. You'll end up the same way as the guy who goes to one of their slot machines and puts in $100. Broke in 10 minutes.