Harrah's begins exchange offers for 10 series of notes

By Angela McDaniels

Tacoma, Wash., Nov. 17 - Harrah's Entertainment, Inc. subsidiary Harrah's Operating Co., Inc. has begun private offers to exchange some of its outstanding notes for up to $2.1 billion of new 10% second-priority senior secured notes.

Notes eligible for exchange are the company's 5½% senior notes due 2010, 7 7/8% senior subordinated notes due 2010, 8% senior notes due 2011, 8 1/8% senior subordinated notes due 2011, 5 3/8% senior notes due 2013, 5 5/8% senior notes due 2015, 6½% senior notes due 2016, 5¾% senior notes due 2017, 10¾%/11½% senior toggle notes due 2018 and 10¾% senior notes due 2016.

The new notes issued in exchange for notes due 2010 to 2013 will mature in 2015, and the new notes issued in exchange for notes due 2015 to 2018 will mature in 2018, according to a company news release.

Additionally, holders of old notes maturing in 2010 and 2011 participating in the exchange offers may elect to receive cash in lieu of new notes under a modified Dutch auction, provided that Harrah's Operating will not pay more than $325 million to auction participants in lieu of new notes.

Old notes tendered will be accepted in order of their acceptance priority levels. The notes due 2010 through 2013 have are acceptance level 1, the notes due 2015 and 2016 are acceptance level 2, the toggle notes are acceptance level 3, and the 10¾% notes due 2016 are acceptance level 4.

The company said it will not accept more than $875 million of notes with an acceptance level of 2 or more than $462 million of the toggle notes.

In addition, the total amount of new notes issued in the exchange offers will not exceed the lesser of the $2.1 billion cap and an amount that would result in the estimated cancellation of debt income, as determined immediately following the expiration date, attributable to the old notes tendered and accepted in the exchange offers to exceed $1.8 billion.

Holders who tender by 5 p.m. ET on Nov. 28 will receive an early participation consideration of $30 principal amount of new notes per $1,000 principal amount of old notes.

The offers will expire at midnight ET on Dec. 12.

The company will also pay accrued interest up to but excluding the settlement date, and the new notes will accrue interest from and including the settlement date.

Accrued pay-in-kind interest on the toggle notes will not be included in determining the principal amount of toggle notes tendered in the exchange offers, but an estimate of the accrued interest through the settlement date has been included in the consideration being offered for the toggle notes.

The exchange offers are not conditioned on a minimum principal amount of notes being tendered or issued.

The company said the purpose of the exchange offers is to reduce the outstanding amount of debt at Harrah's Operating and to extend the weighted average maturity of the subsidiary's outstanding debt.

The new notes will be guaranteed by Harrah's Entertainment and will be secured on a second-priority basis by substantially all of the assets of Harrah's Operating and the assets of Harrah's Operating's wholly owned domestic subsidiaries that have pledged their assets to secure Harrah's Operating's senior secured credit facilities.

The new notes will not, however, be secured by liens on the capital stock of Harrah's Operating or any of its subsidiaries, the release noted.

The exchange offers are being made only to qualified institutional buyers and to some non-U.S. investors located outside the United States.

Global Bondholder Services Corp. (866 736-2200 or 212 925-1630) is the information agent for the offers.

Harrah's Entertainment is a Las Vegas-based casino company.

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