I was sitting on my couch enjoying the Patriots ruin my Monday night parlay when I read a tweet from Tim at Five Hundy By Midnight saying that he doesn’t want to see Harrah’s buy Planet Hollywood. I immediately jumped up and checked my news feeds to see that the rumor may be true as Harrah’s purchased some of Planet Hollywood’s existing debt.
Sources confirmed this weekend that Harrah’s has purchased a portion of the $860 million debt load that is leveraged against the property…
…Brian Gordon, a principal at Applied Analysis, however, suggested Harrah’s could be following the recent trend of acquiring casino properties through debt purchases rather than through an outright buyout.
“With covenant and debt defaults looming around for some of these properties, it’s a potential way to gain eventual ownership of a property,” Gordon said.
The practice has been used successfully in the past locally, most recently when the Tropicana on the Strip was acquired in bankruptcy court.
The article in the Las Vegas Review Journal cites a few recent examples of investors buying casinos on the cheap through debt purchases. I’ve loved Planet Hollywood since the Aladdin was sold and the theme changed. Heck, I even liked gambling at the Aladdin. Planet Hollywood has become one of my favorite casinos on the strip.
I have nothing against Harrah’s and think that this would be a great acquisition for them. It would add a property with a cool, young vibe to their list of properties. It would also allow them more ownership of the middle of the strip. Independent ownership has allowed Planet Hollywood to carve out a niche and my fear would be that the monster that is Harrah’s will homogenize what makes Planet Hollywood unique in it’s own right.
Time will tell whether or not this happens, but unless Harrah’s own debt doesn’t allow this I don’t see how this deal doesn’t get done.
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This news is horrifying to me. I have to agree with Five Hundy By Midnight. I love PH the way it is right now. Don’t get me wrong, I’ve always been a Harrahs fan, but during this past trip, I was looking at its properties with a critical eye and realizing they come up very short. If Harrahs has $860M cash to be throwing around, it would make better use of the money by improving its existing properties–specifically, Flamingo, Harrahs, and Ballys, which are all very tired properties that need some serious sprucing up.
I can’t say I disagree, but I understand why they would make the investment. I’m surprised they could come up with the money since they have so much of their own debt. I think the bean counters know something…