arrah’s decision to sell the eight-year notes, which refinance debt coming due through 2011 and repay bank loans, could be a “bearish effort to fortify the balance sheet or a bullish effort to accumulate cash for acquisitions,” Chris Snow, an analyst at debt-research firm CreditSights in New York, wrote in a report today.
CEO Gary Loveman acquired Planet Hollywood Resort & Casino in February by buying its debt and converting part of the securities to equity. Harrah’s, taken private in a us$ 30.7 billion leveraged buyout in January 2008, also bought a Cleveland, Ohio racetrack in September. The acquisitions followed Harrah’s efforts to cut its debt by us$ 4.2 billion and avoid default by asking bondholders to take losses.
“Given where the company was a year ago, it is fairly impressive that the company may have as much as us$ 1.6 billion in cash and available revolver borrowing capacity” at the end of the second quarter, Snow said.
Jacqueline Peterson, a spokeswoman for Harrah’s, didn’t immediately respond to an e-mail seeking comment.
Standard & Poor’s raised last week its rating on Harrah’s one step to B-, six levels below investment grade as the Las Vegas-based operator of Caesars Palace and Paris casinos sold the notes. The securities, which mature in 2018, priced to yield 13 %, according to data compiled by Bloomberg.
Harrah’s notes have surged to the highest levels since Apollo Management LP and TPG bought the company. “People were under the impression that because of the leveraged buyout of the company, that we were not in a position to expand the business,” Loveman said in a December interview in Las Vegas. “We succeeded at deleveraging the company very substantially and that has created a lot of greater flexibility for us to do things like Planet Hollywood and Ohio racetracks.”
Harrah’s 5.625 % securities due in June 2015 rose to 70 cents on the dollar yesterday, according to Trace, the bond- price reporting system of the Financial Industry Regulatory Authority. The debt traded at 62.625 cents on the dollar on January 28, 2008, the day the buyout was completed.