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Casino Operator Harrah's Takes on Debt to Pay Debt
LAS VEGAS, NEVADA --
Harrah's Entertainment announced today that the casino gambling company will sell $1 billion worth of senior secured notes. The private offering would give the gaming operator cash to pay off existing debt and money for corporate operations.
Trading in Harrah's debt has recently been at discounts, due to uncertainty over the company's stability and liquidity. Harrah's officials have taken advantage of this by buying back debt at less than the price it would have paid at maturity, allowing it to decrease its overall debt size.
Company executives say previous debt exchanges last quarter reduced total debt by $2.3 billion, and dropped annual interest expenses by $104 million. By reducing costs, the company dropped operating losses from $275 million in the first quarter of 2008 to $127.4 million in the same quarter of 2009.
The new notes would not come due until 2017. The private offering is exempt from SEC registration requirements.
Harrah's debt is due to the borrowing undertaken to take the company private, a move made right before the recession began devastating earnings. Also, overextending on constant construction of new, bigger casinos left Harrah's without cash and with burdensome debt.
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