Harrah’s Entertainment Inc., the world’s largest casino company and owner of the World Series of Poker brand, filed an initial public offering (IPO) with the Securities and Exchange Commission on Monday. The company is going public just three years after private equity firms Apollo and TPG Capital took it private for $30.7 billion, and hopes to raise as much as $575 million in stock to finish planned projects in Las Vegas and Ohio.
Harrah’s said on Tuesday in a U.S. regulatory filing that it will use the proceeds of the IPO to finish its 660-room Octavius Tower at Caesars Las Vegas, develop the LINQ retail and entertainment area next to the Flamingo on the Las Vegas Strip, and invest in the potential joint venture development of two Ohio casinos with Rock Gaming LLC. Harrah’s said in the filing that Apollo and TPG, the company’s largest shareholders, would retain their controlling interest, but didn’t release the firms’ ownership percentages.
Also included in the Harrah’s IPO is New York hedge fund company Paulson & Co. Inc., which is following through on arrangements that were set in August by selling its 9.9% stake in Harrah’s. Paulson & Co. Inc. got its stake in exchange for taking on $710.3 million in debt. The hedge fund bought most of that debt, $532 million, for $354.9 million – nearly two-thirds of its face value.
Harrah’s has been suffering through an economic downturn since the recession hit in 2008 and has taken steps to lower its debt load and interest expenses over the past year. The company, which owns or manages 52 casinos in seven countries, reported $8.9 billion in revenue in 2009, but said it lost $274 million on $2.2 billion in revenue during the second quarter this year. As of June 30, Harrah’s had a long-term debt of $23.3 billion, mostly due in 2015 or later. It assumed $12.4 billion in debt with the takeover by affiliates of Apollo and TPG in January 2008.
Still, there appears to be a bright light at the end of the tunnel for the world’s largest gambling company. In the filing to the Nevada Gaming Control Board requesting to sell the stock, Harrah’s alluded to recent upswings in Las Vegas tourism numbers. In August, gaming revenue soared 21% on the Strip, where Harrah’s owns and operates eight different casinos. That, along with the fact that visitation to Las Vegas has increased or been flat for 12 straight months, may attract investors. Some industry experts are even anticipating close to $1 billion in IPO sales.
“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.”
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. Like Harrah’s, MGM has been saddled with a heavy debt load for quite some time, and proceeds from MGM’s sale will go toward its repayment.
Stay tuned to Poker News Daily for updates on the Harrah’s Entertainment IPO.
Once Harrah’s goes public their stock will plummet like the Titanic