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Harrah’s Changes Name, Expands IPO

Posted on November 8th, 2010

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The largest casino company in the world, Harrah’s Entertainment Inc., made several changes this week, including a change of name and an infusion of more funds to its IPO. The company has increased its planned initial public offering to be at $610.9 million. Meanwhile, it will now be known as Caesars Entertainment Corp. By November, the company is planning to make 31.3 million shares available. Each share will be priced from $15 to $17, according to the company’s regulatory filing which happened before the week ended. The company’s offer also includes an option to sell an additional 4.69 million shares. The company will be trading its shares on the Nasdaq. It will be under the symbol “CZR.”

These shares of stock that will be sold by the company in addition to the $710.3 million worth of shares registered for sale by a hedge fund made available by John Paulson’s Paulson & Co. Paulson has agreed to acquire up to 10 percent of Harrah’s five months ago by exchanging bonds that were acquired at a discount. Last month, Harrah’s also said that it projects that its IPO would generate as much as $575 million, which will be funneled to projects in Las Vegas and Ohio. As a company made private in January 2008, Harrah’s has tried looking into public markets because as of the moment, the private Las Vegas industry has been in a slump while casino securities have been rallying. Gambling revenue in Las Vegas strip has jumped 21 percent though for the month of August, according to Nevada’s Gaming Control Board. The 10 percent secured bonds of Harrah’s meanwhile, which is due in December 2018 has increased by 3.25 cents to 92.75 cents on the dollar as of Friday New York, the highest on record. This is according to Trace, the reporting system on bond prices of the Financial Industry Regulatory Authority. The securities has experienced increases since June 4, but experienced record lows at the first months of the year, particularly on February 10, when it traded as 72.5 cents on the dollar.

Harrah’s Chief Executive Officer Gary Loveman said that as of the moment, despite of the situation continuing to be more stable, the company is continuing to lower costs, and is aiming for another $129 million in savings for the fourth quarter. Loveman said, “Visitation also increased slightly in certain markets, including Las Vegas, and there are signs consumer spending may be stabilizing.” Because of smaller asset write downs, Harrah’s reported a third-quarter loss which is lower. The company’s net loss decreased from $1.62 billion last year to $164.8 million for the third quarter. Harrah’s also filed that its sales reflected a bit of a change at $2.29 billion. Meanwhile, the company’s booked costs is at $44 million reflected the value of some of its assets which have declined, compared with 2009 figures of $1.33 billion. The company’s cash flow, or property earnings before the deduction of interest, taxes, depreciation and amortization, went down by $505.6 million, a 10 percent decrease.

Among the company’s more pronounced wins included its rescue of Planet Hollywood Resort & Casino from default in February. It also acquired a property next to its other resorts in the Las Vegas Strip for a huge discount by buying it less than its construction cost. As for the IPO, the proceeds are being planned by Harrah’s to be used to complete the Octavius Tower at Caesars Las Vegas, which will contain 660 rooms. Another beneficiary of the IPO money will be the development of the LINQ retail and entertainment area which is adjacent to the Flamingo on the Las Vegas Strip. Lastly, the company will also use the IPO money to invest in the projected joint-venture development with Rock Gaming LLC of two gambling facilities in Ohio.

More than $4 billion in debt was erased by the company for the past two years. It accomplished this by offering its creditors new bonds with an enclosed discount for their old notes. The company also bought back other debt for less than their face value and extended maturities on loans worth $5.5 billion. In January 2008, the private of Harrah’s which included debt and transaction costs, were taken by Apollo Management LP and TPG Inc. for $30.7 billion.