Harra Hits Group Litigation Over Debt Scheme

Harrah’s was sued in U.S. District Court in Delaware last month by two bondholders who claimed that a recent debt exchange deal devised by Harrah benefited some large corporate bondholders and put other classes of bondholders at risk. Harrah’s is “on the verge of bankruptcy, default and other insolvency events,” the lawsuit alleges.

“In an effort to ensure that only a limited class of individuals and companies are compensated for their debt investments in the Hara that harms other investors, the defendants have completed tender offers that benefit the chosen individuals and companies that exclude all other investors. Without any legal justification for cherry-picking among investors, the tender offer of bonds by defendants allowed those elite individuals and companies to acquire newly issued bonds that would take precedence over previously issued bonds in exactly the same category and be subordinate to others,” the lawsuit states.

The plaintiffs are Willis Shaw and S. Blake Murchison. Murchison also filed a class action suit against Station Casino last week, saying Station’s plan to restructure its debt in bankruptcy court does not treat all bondholders fairly. In unrelated cases, Las Vegas Sands Inc. is facing a lawsuit from class action attorneys over the fall in its stock price.

Hara and members of the board, who were sued together, have not yet responded to the showmutcheson lawsuit. Later Monday, Hara declined to comment on the lawsuit, citing her policy of not commenting on the pending lawsuit. “Plaintiffs’ bond holdings have likely been subordinated to newly issued bonds and, as a result, have become worthless as the specter of Hara’s insolvency approaches,” the lawsuit argued.

The lawsuit comes against the backdrop of numerous gaming operators in Las Vegas and around the world struggling to raise debt as the recession has led to fewer trips to Las Vegas and other gaming markets. It has also cut profits for casino operators from gamblers.

Harra’s said on Friday it had asked banks to pay $740 million in advance with a $2 billion credit limit. That maxed out that credit limit, with one analyst saying they would likely need to stockpile cash to cover costs while looking for ways to rebalance the heavy debt burden reported at more than $24 billion. 사설 토토사이트

That analyst was Chris Snow. His company, CreditSites, released a report on Monday saying that even considering Hara’s cost-cutting measures to save $440 million a year, it does not change Hara’s underlying problem with too much debt for services given the slowing economy that is hurting casinos and resorts. Harrah’s stock, which added to its debt burden last year by a $30.7 billion deal, is “operating at borrowed time,” the report said

“At this point, the company’s next move may include another bond exchange, a bankruptcy offer to bondholders or a gambler wishing to return,” CreditSights said. On Friday, Harry’s spokesman Gary Thompson declined to comment, saying it was speculating about a possible bankruptcy reorganization.

With Las Vegas Stripes including Caesars Palace, Haras Las Vegas, and Imperial Palace, and numerous accommodations nearby, Haras has 51 casinos in six countries with 40,000 hotel rooms. It has yet to announce its fourth-quarter results, but lost $129.7 million in the third quarter of 2008 on revenue of $2.645 billion.

The Shaw-Mutchison lawsuit was filed by lawyers Joseph A. Rosenthal and P. Bradford DeLouis of Del Wilmington, law firm of Rosenthal, Monheit & Goddess. Lawyers for Boca Raton, Fla., of Coughlin Stoa Geller Rudman & Robbins LLP, the same company that is involved in Murchison’s lawsuit against Station Casino. Additional plaintiffs’ attorney for Harrer’s lawsuit is S. Jean Collie, of Little Rock, Ark.

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