Splitting eights

9 September 2009 By Lauren Silva

The US casino operator has just completed the latest stage of a restructuring designed to cut its debt. But the business may still be worth less than what it owes creditors. It s a reminder of how frothy debt markets became and why new creditors to old LBOs should be cautious.

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On December 22, 2008, US casino company Harrah's Entertainment completed a debtfordebt swap. In April, it completed a second debt exchange, which included a deal to buyback some of its debt using cash. Harrah's at the same time amended one of its loan agreements.

In May, Harrah's completed a $1.375bn bond offering. The bonds carried an 11.25% interest rate. Proceeds were used to repay a portion of the term loan. On September 8, Harrah's completed a $720m addon offering. As of June 30, Harrah's had $19.4bn in debt.

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