Fitch may downgrade Harrah's

Fitch Ratings said it may downgrade Harrah's Entertainment Inc.'s issuer default rating into the B category from its current BB+ rating based on the planned capital structure for its leveraged buyout by Apollo Management and Texas Pacific Group.

The planned transaction will include $5.87 billion equity contribution from the private equity firms, a $7 billion senior secured seven-year term loan, a $6.025 billion bond issue and a $7.25 billion commercial mortgage-backed securities note. In addition to the $7 billion term loan, the senior secured credit facilities will include a $2 billion six-year revolver that is expected to be undrawn at closing.

The agency estimated that if the transaction is completed as planned, Harrah's total debt-to-EBITDA leverage could be in the 8.5x to 9x range, and close to 60% of the company's pro forma debt will be secured.

Despite the significantly weaker credit metrics, Harrah's long-term credit profile would benefit from being the largest and most diversified casino operator with solid brands and excellent marketing ability, Fitch added.

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