Harrah's Investors Prepare for Casino Operator to Bankrupt
The companies owning Harrah's Entertainment made moves this week to ensure their position if the casino gambling operator is forced to seek bankruptcy protection.TPG Incorporated and Apollo Management are purchasing debt from bondholders in the event the gaming company defaults on payments.
Harrah's the world's largest casino company, reported a loss of $5.35 billion for its fourth quarter. If company officials cannot make a deal to restructure debt, Harrah's may soon be forced to ask for court protection.
Moody's financial rating service placed Harrah's in the group of US companies most likely to default on loan obligations.
Much of the debt was created in the process of taking the company private, just before the onset of the worldwide economic crisis. Rapidly declining revenues have not sufficed to meet the obligations which seemed so reasonable when the gambling boom looked unstoppable.
By buying up existing debt, the two owners plan to be in position to still control the company if bankruptcy occurs. The loans being bought would likely be converted into company equity in a bankruptcy procedure.
Several other casino gambling companies have either filed for bankruptcy or are teetering on the edge of doing so. Trump Entertainment went bust last month, and Stations Casinos is struggling to renegotiate debt after failing to make loan payments. MGM Mirage has announced the likelihood it may also be unable to meet credit covenants.
