According to Jan Jones, Harrah’s entertainment’s position on the matter is simply stated, “Taking advantage of good economic opportunities is always in the company’s best interest.”
The long-term casino investments will be beneficial to the company as long as they find a way to pull themselves out of their massive debt at the same time. Acquiring other casinos that currently are losing money could however add to the expanding debt, therefore not making a lucrative offer.
According to sources including Union Gaming Group analyst Bill Lerner, Harrah’s current financial situation is not an indication that the company is not growing strong. The high debt load is being suffered by many casinos throughout the industry. It is believed however that these purchases are beneficial for the long-term growth of the company and therefore a smart investment at this time.
The amount of liquidity that Harrah’s Casino and resort currently maintains is most likely higher than the industry believes and better structured than their billions of dollars of debt would disclose. As many of their loans will not mature within the next year, this liquidity allows the casinos the opportunity to use their purchased power now as an investment for the future.
The irony of this situation is that Harrah’s Casino resorts have been struggling financially this year with avoiding complete bankruptcy, and yet they still find the liquidity to purchase more casinos. The offering of new notes to its investors with later maturity dates have helped alleviate the pressure that the debt would otherwise cause.
Through cost-effective reduction as well as restructuring of the Casino resorts, Harrah’s has been able to knock down nearly 20% of its debt within this year. A solid infrastructure of the casino company shows their ability to manage large amounts of revenue and balance them with large amounts of debt. Harrah’s will continue to look for opportunities for growth in order to build a stronger future.
