S&P downgrades Harrah's

Standard & Poor's said it lowered its corporate credit rating on Harrah's Entertainment Inc. and its wholly owned subsidiary, Harrah's Operating Co. Inc., to B from B+. It also lowered the issue-level ratings on the company's debt by one notch.

The ratings were placed on CreditWatch with negative implications.

The agency said the downgrade reflects the recent acceleration of property-level EBITDA declines across much of Harrah's portfolio and S&P's expectation that, given the pressure that the current weakened state of the economy and substantial pullback in consumer discretionary spending will likely place on Harrah's cash flow generation over the next few quarters, the company's ability to repay an amount of debt sufficient to support a B+ rating is no longer a realistic possibility.

The CreditWatch listing addresses the agency's concern that, given the ongoing rapid deterioration of the cash flow base, Harrah's financial risk profile does not support the B rating. S&P estimates the operating lease-adjusted total debt-to-EBITDA ratio at more than 9.5 times as of Sept. 30.

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