After announcing earlier this month that he had purchased big stakes in MGM Mirage and Boyd Gaming, investor John Paulson’s hedge fund, Paulson & Co., has acquired a 9.9 percent equity stake in Harrah’s Entertainment. Paulson will exchange 0 million in bonds for the equity. Analysts speculated this could be the first step in restoring Harrah’s as a public company.
Apollo Management and TPG Capital, which took Harrah’s private in 2008, also traded in $408 million of their notes for a 5.6 percent stake of the company.
Paulson, Apollo and TPG will also purchase $835 million in senior notes from Harrah’s subsidiary Harrah’s BC, Inc., netting Harrah’s $557 million.
Harrah’s has $19.3 billion in debt, which will be reduced by the $1.5 billion in cash it is receiving from the deals. The company also has a $1.5 billion revolving loan.
“This is an important transaction for Harrah’s Entertainment for a number of strategic reasons,” said Harrah’s Chairman and CEO Gary Loveman. “We are raising capital for emerging domestic and international growth opportunities, and upon closing of the exchange, will reduce our debt and lower our interest expense. The investment from Paulson, an independent third party and a large, sophisticated investor, reflects the strong and resilient performance of our company, particularly as we emerge from a difficult economic climate, and the encouraging prospects for our future. We also are gratified by the confidence in Harrah’s demonstrated by our sponsors, Apollo and TPG.”
Harrah’s must register Paulson’s shares with the Securities and Exchange Commission after receiving regulatory approval of the deals.