Apollo and TPG hit by us$ 600 million Harrah’s writedown

Apollo and TPG, the private equity house that walked away from Bradford & Bingley last month, paid us$ 17 billion for Harrah’s in January, but since then economic woes have hit US gaming companies hard.

Harrah’s reported a 20.6 percent fall in earnings before interest, tax, depreciation and amortisation to us$ 436.7 million, and the company also has a large debt burden to service.

The writedowns emerged when Apollo’s listed arm, Apollo Alternative Assets (AAA), announced its second-quarter results this week. AAA, which holds 8.8pc of Apollo, wrote down the value of its stake from us$ 179.5 million in the first quarter to us$ 134.3 million in the second quarter. TPG is believed to have written off a similar amount.

The losses are a blow for Apollo, which reported a first-quarter loss of $96.4 million in a separate US Securities and Exchange Commission filing this week, and for TPG.

Apollo spent heavily at the height of last year’s buy-out boom, buying companies such as UK estate agency Countrywide, which is now likely to be worth much less than the £1bn Apollo paid for it. Other private equity houses, including KKR, which took Alliance Boots private before the credit crunch hit last summer, are also expected to suffer from falling valuations.

Apollo managing partner Josh Harris defended the Harrah’s acquisition yesterday, saying: "The gaming industry has attractive long-term fundamentals and we believe we acquired a leading company in the industry."