Harrah's tweaks payout for 7½% bonds under tender offer

By Angela McDaniels

Tacoma, Wash., Dec. 27 - Harrah's Entertainment, Inc. said the reference security used to determine the tender payout for Harrah's Operating Co., Inc.'s $425 million of 7½% senior notes due Sept. 1, 2009 will be the 4% U.S. Treasury due Aug. 31, 2009.

When the company first announced its tender offer and consent solicitation on Dec. 21, it said the reference security for the notes would be the 3¼% Treasury due Jan. 15, 2009.

Other securities covered by the tender offer are Harrah's Operating's $250 million of senior floating-rate notes due 2008, $400 million of 8 7/8% senior subordinated notes due Sept. 15, 2008, $136.294 million of 7½% senior notes due Jan. 15, 2009 and $300 million of 7% senior notes due April 15, 2013.

In addition, Harrah's Entertainment and Harrah's Operating are holding a tender offer and consent solicitation for Harrah's Operating's $375 million of floating-rate contingent convertible senior notes due 2024.

The tender offers are being conducted in connection with the previously announced acquisition of Harrah's Entertainment by Apollo Global Management, LLC and TPG Capital, LP.

Completion of the tender offers and consent solicitations is not a condition to completion of the merger, but the tender offers and consent solicitations are subject to conditions, including satisfaction of the conditions to the acquisition and the receipt of consents from holders of a majority of each series of the securities.

The consent deadline is 5 p.m. ET on Jan. 7 for the straight debt, and the tender offer ends at 8 a.m. ET on Jan. 23. The tender offer and consent solicitation for the convertibles also ends at 8 a.m. ET on Jan. 23. Only holders who tender by the consent deadline will receive the consent payment.

The amount on offer is:

• $970 per $1,000 principal amount for the floaters plus a $30 per $1,000 consent payment for a total of $1,000 per $1,000 principal amount;

• For the 8 7/8% notes, an amount set using a spread of 50 bps over the 3 1/8% Treasury due Sept. 15, 2008, with the total to include a $30 per $1,000 consent payment;

• For the 7½% notes due Jan. 15, 2009, an amount set using a spread of 50 bps over the 4% U.S. Treasury note due Aug. 31, 2009, with the total to include a $30 per $1,000 consent payment;

• For the 7½% notes due April 15, 2009, an amount set using a spread of 50 bps over the 4% Treasury due June 30, 2009, with the total to include a $30 per $1,000 consent payment;

• For the 7% notes, an amount set using a spread of 50 bps over the 3 3/8% Treasury due Nov. 30, 2012, with the total to include a $30 per $1,000 consent payment; and

• $1,379.52 per $1,000 principal amount for the convertibles.

Calculations using a reference Treasury will pay the sum of the present value on the payment date of $1,000 at the securities' maturity date plus interest payments, discounted using the bid-side yield on the reference Treasury at 2 p.m. ET on Jan. 8 plus the spread, minus accrued interest up to but excluding the payment date. That total includes the consent payment.

Harrah's will also pay accrued interest up to but excluding the payment date.

Holders who tender will be required to deliver consents to amendments to the indentures that will eliminate or make less restrictive substantially all of the restrictive covenants as well as certain events of default and related provisions in the indentures.

Citi (800 558-3745 or call collect 212 723-6106) is lead dealer manager. Global Bondholder Services Corp. (866 924-2200, banks and brokers call 212 430- 3774) is information agent.

Harrah's is a Las Vegas-based casino company.

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