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Arnold M. Knightly

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Harrah's steps closer to Planet Hollywood deal

1 Dec 2009

By Arnold M. Knightly
LAS VEGAS, Nevada -- Harrah's Entertainment has taken another step forward in its plan to buy Planet Hollywood Resort, a plan the resort's current owner called a "perfect marriage."

The gaming giant has filed applications with Nevada gaming regulators seeking approval to acquire the niche property, the state Gaming Control Board confirmed Monday.

The application was filed late Wednesday afternoon, but the board's offices were closed Thursday and Friday for the Thanksgiving weekend.

Board Chairman Dennis Neilander said he didn't know how long it would take to investigate the request or when the acquisition would come before regulators for approval. The board could be delayed if the application is missing documents and cannot be assigned to investigators, Neilander said.

Harrah's Chairman and CEO Gary Loveman told employees last week in an e-mail that the company wants to "own and manage the property."

Planet Hollywood founder Robert Earl said in a memo to employees released late Monday that he will "continue in his role" and will work closely with the new Harrah's team.

"I feel this is a perfect marriage for our brand," Earl said. "With Harrah's in the driving seat we'll be able to go from strength to strength. They bring many different assets to the Planet that we do not possess."

Earl is chief executive officer of the restaurant company Planet Hollywood and guides the marketing and positioning of the property in the entertainment industry.

Harrah's has been negotiating to acquire more of Planet Hollywood Resort's $860 million debt, which is in default. In September, Harrah's controlled nearly $140 million of the debt.

Lenders took over the property's finances the same month after the owners defaulted on the loan, according to a November filing with the Securities and Exchange Commission.

The Gaming Control Board's distressed property team has been monitoring the property since the default, Neilander said.

How a final purchase agreement is structured also could affect how long licensing will take, he said.

"We have to figure out how they're going to swap this debt for equity," Neilander said. "There are other bondholders. That's the other thing we have to figure out is how do the rest of the debtholders shake out on this."

Neilander said Harrah's financial position also will need to be investigated before a deal is approved.

The gaming company, which owns and manages 52 casinos around the world, reported $19.3 billion in long-term debt on Sept. 30.

Harrah's has nearly $501.8 million in debt maturing next year and $168.9 million due in 2011, an August filing with the Securities and Exchange Commission showed. The company has $6.3 billion in term loans maturing by 2015 and a $1.1 billion credit agreement that matures a year earlier, SEC filings show.

Harrah's postponed completion of 660 rooms at Caesars Palace's Octavius Tower, and construction of the Margaritaville Casino in Biloxi, Miss., is still on hold.

Harrah's interest in Planet Hollywood Resort is twofold. It wants the brand name and it would give Harrah's control of all 126 acres on the east side of the Strip between Flamingo Road and Harmon Avenue.

Planet Hollywood Resort is on the southernmost end of a line of Harrah's-owned casinos on the east side of Las Vegas Boulevard. The operator owns Harrah's, Imperial Palace, Flamingo, Bill's, Bally's and Paris Las Vegas.

The location would allow the company to integrate some of its management and casino operations with its other Strip properties.

It would also add 2,496 hotel rooms to Harrah's inventory of 20,370 rooms on or near the Strip.

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