Harrah's prices tender offer for 7%, 7½%, 8 7/8% notes

By Angela McDaniels

Tacoma, Wash., Jan. 8 - Harrah's Entertainment, Inc. announced on Tuesday what Harrah's Operating Co., Inc. will pay in the tender offer for its $400 million of 8 7/8% senior subordinated notes due Sept. 15, 2008, $136.294 million of 7½% senior notes due Jan. 15, 2009, $425 million of 7½% senior notes due Sept. 1, 2009 and $300 million of 7% senior notes due April 15, 2013.

For each $1,000 principal amount of notes tendered, holders will receive $1,032.35 for the 8 7/8% notes, $1,038.78 for the 7½% notes due Jan. 15, 2009, $1,063.88 for the 7½% notes due Sept. 1, 2009 and $1,155.56 for the 7% notes.

In each case, the payout includes a consent payment of $30.00 for each note tendered by 5 p.m. ET on Jan. 7, the consent deadline.

The company will also pay accrued interest up to but excluding the payment date.

The payouts were determined at 2 p.m. ET on Jan. 8 and equal the sum of the present value on the payment date of $1,000 at the securities' maturity date plus interest payments, discounted using the bid-side yield on the reference Treasury plus the spread of 50 basis points, minus accrued interest up to but excluding the payment date

The reference security was the 3 1/8% Treasury due Sept. 15, 2008 for the 8 7/8% notes, the 4% U.S. Treasury note due Aug. 31, 2009 for the 7½% notes due Sept. 1, 2009, the 4% Treasury due June 30, 2009 for the 7½% notes due Jan. 15, 2009 and the 3 3/8% Treasury due Nov. 30, 2012 for the 7% notes.

Also included in the tender offer is Harrah's Operating's $250 million of senior floating-rate notes due 2008, and the companies are holding a separate tender offer and consent solicitation for Harrah's Operating's $375 million of floating-rate contingent convertible senior notes due 2024.

The payout for the floating-rate notes is $970 per $1,000 principal amount, and the payout for the convertibles is $1,379.52 per $1,000 principal amount.

As of the consent deadline, holders had tendered with consents 99.69% of the 7½% notes due Sept. 1, 2009, 98.44% of the 8 7/8% notes, 95.81% of the 7½% senior notes due Jan. 15, 2009 and 99.71% of the 7% notes.

The consents will allow the company to amend the note indentures to eliminate or make less restrictive substantially all of the restrictive covenants as well as certain events of default and related provisions in the indentures.

Harrah's entered into supplemental indentures incorporating the proposed amendments that will go into effect when the company buys the bonds.

The tender offers are being conducted in connection with the previously announced acquisition of Harrah's Entertainment by Apollo Global Management, LLC and TPG Capital, LP.

Completion of the tender offers and consent solicitations is not a condition to completion of the merger, but the tender offers and consent solicitations are subject to conditions, including satisfaction of the conditions to the acquisition and the receipt of consents from holders of a majority of each series of the securities.

The tender offer for the straight debt ends at 8 a.m. ET on Jan. 23. The tender offer and consent solicitation for the convertibles also ends at 8 a.m. ET on Jan. 23.

Citi (800 558-3745 or call collect 212 723-6106) is lead dealer manager. Global Bondholder Services Corp. (866 924-2200, banks and brokers call 212 430- 3774) is information agent.

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

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