Why Did Harrah's Just Cancel its IPO?
From Associated Press:
"Harrah's Entertainment Inc. canceled its initial public offering Friday, folding its hand for now on a risky bet on returning to the stock market just three years after it went private.
The casino operator was expected to price the offering on Thursday and begin trading on the Nasdaq this week. Harrah's had said it would raise as much as $531 million for casino projects and to help with its heavy debt burden.
A Harrah's spokeswoman said the company is not commenting beyond a brief statement announcing the cancellation and citing market conditions.
But the company had planned its IPO in what has been a rough time for the casino business, as people cut back on gambling in the tough economy and opted to save their money instead. Harrah's reported a loss of $634.4 million during the nine months that ended Sept. 30, though recently its business, along with the broader casino industry, has shown signs of improvement.
The IPO would have helped ease the company's heavy debt burden. Harrah's has nearly $20 billion in debt, and Francis Gaskins, president of IPOdesktop, estimates the company is spending as much as 22 percent of its revenue on interest payments. This would put interest payments at about $1.47 billion for the first nine months of the year.
Much of the company's debt was piled on by the two private equity companies, Apollo Management Group and Texas Pacific Group, who took Harrah's private three years ago. Apollo and TPG planned to keep majority control of it after the IPO. They paid $30.7 billion in 2007 in what was one of the biggest leveraged buyouts ever. But that was before the financial crisis hit.
The company's revenue, which peaked the year of the buyout at $10.8 billion, tumbled 6 percent to $10.1 billion in 2008. Recently, Harrah's business has started to stabilize, and the company had planned to use the IPO to expand.
Harrah's, which has planned to change its name to Caesars Entertainment Corp., owns or manages more than 50 casinos in 12 states and seven countries.
In a recent note to investors, Jefferies analyst David Katz said that with industry sentiment at a "historical low," new property openings and the improving economy should accelerate earnings growth for casinos and gaming companies.
Harrah's shelved its offering a day after General Motors returned to Wall Street with its IPO."0