Analysts are mixed on the news, saying Harrah's indeed needs to address near-term debt maturities but it's only delaying the problem, and that to stave it off with new senior debt at much higher interest rates hurts future cash flow. Harrah's has more than $19 billion in debt, including $668 million in debt maturing in 2010 and 2011, according to its latest 10-Q.
Some of the proceeds from the new term loans may be used on new initiatives. Harrah's last week revealed an $89-million agreement to buy the Thistledown horse-racetrack near Cleveland. The state Supreme Court ruled this week that the state's plan to allow up to 17,500 video lottery terminals for certain racetracks as a budget deficit reducer is subject to a statewide voter referendum. Also this month, Harrah's reportedly purchased 16% of the $860 million in recently defaulted debt tied to the Planet Hollywood Resort, which could lead to an ownership stake.
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