Sunday, November 1, 2009

Apollo & TPG Shaft Harrah's Bondholders

DealBook reported:

Harrah's Entertainment, he struggling casino operator, said Friday it had agreed to pay $250 million to buy back some commercial loans at a fraction of their face value.

The company said in a regulatory filing on Friday that it agreed to the loan buyback last week, The Associated Press reported.

Harrah’s, based in Las Vegas, said it would pay 25 cents to 30 cents per $1 in principal, and would cancel the loans it buys.

The privately held company runs more than 50 casinos worldwide. It said it had $19.3 billion in debt as of June 30.

Apollo Management and TPG loaded Harrah's with debt when they purchased the company in 2006. Seeking Alpha reported:

Harrah's Entertainment has approved the $17.1 billion buyout offer from Apollo Management LP and Texas Pacific Group. The is the fourth largest private equity buyout ever.
When Harrah's pays 25 to 30 cents on the dollar, will the bonds default, triggering credit default swaps or other hedges? Uncle Sam provided an estimated $25 billion tax break for firms buying debt on the cheap in the Stimulus Bill. With all the companies buying back severely discounted debt, how big is the tax break?

The big money boys gambled. How will taxpayers cover the PEU boys losses?