For a company that seems to be barely keeping its head above water, Harrah’s Entertainment behaved more like an angered shark than a wounded catfish last month. Despite the fact that the company is laboring under massive amounts of debt since being taken private in 2007 by Apollo Management and Texas Pacific, Harrah’s last month made moves in two jurisdictions that reaffirmed that gaming’s largest company is not to be taken for granted.
In Las Vegas, Harrah’s Entertainment has purchased part of Planet Hollywood’s $860 million in debt, which some analysts say could lead to an eventual takeover of the property by Harrah’s.
“With covenant and debt defaults looming around for some of these properties, (purchasing debt) is a potential way to gain eventual ownership of a property,” Applied Analysis principal Brian Gordon said.
University of Nevada-Las Vegas finance professor Mike Sullivan told the Las Vegas Review-Journal that if Harrah’s can eliminate Planet Hollywood’s debt, the property could still be a money-maker.
“Harrah’s is buying a position on the cheap right now but with long-term ideas,” Sullivan said. “They’ve got their foot in the door right now. They are picking up a position of influence, so they must be interested in acquiring assets.”
Officials at both Harrah’s and Planet Hollywood have declined to confirm the purchase, and many are wondering how the highly leveraged Harrah’s managed to come up with the funds to buy the debt in the first place. However, Planet Hollywood must be grateful that Harrah’s stepped in. The property was in danger of defaulting on its loan agreements, according to an August 14 filing with the Securities and Exchange Commission.
In Ohio, the company purchased Thistledown Racetrack from Magna Entertainment Corp. at a September auction for $89.5 million, placing it in a strategic position now that Ohio Governor Ted Strickland has approved VLTs at the state’s seven racetracks. Even if Ohio voters approve four regional casinos in a competing referendum in November, one of which would be in Cleveland where the racetrack is located, Harrah’s is still in good shape.
Harrah’s won an auction for the property after 40 rounds of bidding that had been started at $22.3 million by Penn National Gaming. The auction was part of bankruptcy proceedings for the Delaware-based Magna, and has been approved by the bankruptcy judge. The purchase does require the approval of Ohio gaming regulators, however.
Thistledown is among 11 racetracks that Magna is selling off, others being Santa Anita, Lone Star and Golden Gate Fields. It recently sold Remington Park to the Chickasaw Nation of Oklahoma.
In mid-September, however, a challenge to Strickland’s unilateral legalization of the VLTs at the racetracks was upheld by the Ohio Supreme Court, meaning that the measure will have to be placed on the November ballot, along with the four-casinos proposal, and be passed by state voters in order to be implemented.