IPO Gamble: Harrah's Offering Likely Delayed

At this point, it's far from clear that Harrah's Entertainment, a 2006 $28 billion LBO (leveraged buyout), will make its way back to the public markets.


The pricing of the world's largest casino operator by revenue was expected on Thursday and CNBC sources now say an announcement on the offering's timing is expected ahead of the market open Friday.

Pricing for what was filed as a $470 million IPO (initial public offering) looks likely to be delayed by the underwriters who are viewing an order book on the deal that has been hard to fill anywhere near the anticipated price range of $15 to $19.

It appears that Harrah's private equity sponsors may be forced to price the deal well below that range, necessitating its being refilled and thereby delaying Harrah's re-entrance to the public markets—this time under the name Caesars Entertainment.

Whatever name it has, investors continue to shy away from IPOs of this type—deleveraging events for portfolio companies of private equity.

Caesars, of course, will be far from deleveraged with almost $22 billion in debt making it a very leveraged play on a turn in the broader economy and leaving it's equity highly vulnerable to any downturn.

Until we have more job creation and economic growth, more certainty in the economy, I think the consumer is not going to be spending disposal income; I say spending, as opposed to wagering, in U.S.-based casinos.

Harrah's is too much of a wish and a prayer, as far as I’m concerned.

TPG and Apollo will not be selling any of their holdings in Caesars, which if and when it does get this offering done will have 81 percent of its ownership in the hands of the private equity firms that took it private.

What an IPO will do is provide the company another capital source as it seeks to further deleverage from that 2006 LBO.



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