rivate-equity firms Apollo Management LP and TPG Capital acquired Harrah’s for us$ 30.7 billion in January 2008. Since then, Harrah’s and the rest of the casino business have been slammed by the deepening recession.
Harrah’s is seeking to execute a debt exchange offer, the Journal said. Under such offers, companies ask their bondholders to exchange their debt for new notes priced at a discount and with longer maturities.
To entice bondholders to forgive debt, companies offer a higher interest rate or a more senior position in the capital structure, which makes the bondholders more likely to get paid back in case of a bankruptcy filing. Apollo and TPG were not immediately available for comment.
Harrah’s debt is trading at severely depressed prices on concerns that the company will default, with its loans trading at 58 cents on the dollar and high-yield bonds trading as low as 6 cents on the dollar, the Journal said, citing fixed-income research firm KDP Investment Advisors.
Harrah’s has us$ 710 million of debt coming due in 2010 and an additional us$ 308 million due in 2011, according to KDP. To shore up its liquidity last month, the company drew down the us$ 740 million remaining on its us$ 2 billion revolving bank line.
This would be the second time Harrah’s owners have approached its debt holders with an exchange offer. Late last year, it reduced its net debt by about us$ 1 billion, which was less than expected, and pushed back the maturity of some bonds by several years.