| LOS ANGELES/NEW YORK
LOS ANGELES/NEW YORK Casino company Harrah's Entertainment Inc folded on a planned $500 million initial public offering on Friday, raising questions about the the fate of other private equity-backed companies waiting to list in the United States.
The official end to Harrah's bid to become public comes as private equity firms are looking to exit portfolio companies bought at the height of the buyout boom of 2005 to 2007.
Private equity-backed hospital operator HCA Inc, U.S. retailer Toys R Us and Nielsen Holdings, whose viewership ratings often determine the fate of TV shows have all filed with U.S. regulators to list as publicly-traded companies in the United States.
The market for new issues in the United States is bustling -- on Thursday, one-time blue-chip General Motors Co (GM.N) made a triumphant return to Wall Street with a $20.1 billion offering, the biggest in U.S. history -- but investors have historically been more critical of private equity-backed companies, which typically have higher levels of debt.
Harrah's stood out for its heavy leverage, analysts said. The company's net tangible book value before the IPO was a negative 27.74 cents, said David Menlow, president of IPOfinancial.com, an independent research firm.
"The debt structure of the company was a little too much for investors to handle," he said.
On Thursday, sources familiar with the matter told Reuters the planned listing of about 9.3 percent of the world's largest casino operator by revenue was being delayed due to concerns that the price range -- $15 to $17 a share -- was too high.
Harrah's, in a statement Friday announcing the IPO had been scrapped, cited difficult market conditions. Analysts noted a chillier reception to private equity-backed offerings.
INDUSTRY HIT HARD
The economic downturn has hit the casino industry hard, with many companies having trouble keeping up with high debt loads. Like many of its peers, Harrah's has been restructuring its debt; earlier this year it issued new notes to pay off debt that was maturing this year and in 2011.
Harrah's, controlled by Apollo APOLO.UL and TPG Capital TPG.UL, filed for the IPO in August.
In recent months, the IPO market has been less than hospitable to private equity-backed debuts. For example, Dutch chipmaker NXP Semiconductors NV (NXPI.O), which was backed by private equity firms including KKR and Bain and debuted in August, is currently trading at $12.90, 7.9 percent below its IPO price.
Apollo and TPG bought Harrah's in a $31 billion leveraged buyout in early 2008, just as the global financial crisis erupted.
Harrah's, which is changing its name to Caesars Entertainment Corp, has since seen its financial position erode. It posted a net loss of $165 million in the third quarter.
Harrah's lack of a casino in Macau has also hurt its business, Menlow said. The Chinese enclave overtook Las Vegas as the world's largest generator of gambling revenue several years ago.
Harrah's operates about 50 casinos, primarily in the United States and Britain, mostly under the Caesars, Harrah's and Horseshoe brands. It also owns and operates the World Series of Poker tournament and brand.
Paulson & Co, a hedge fund manager that injected cash into Harrah's in June in exchange for equity, was also planning to sell its stake of 30.24 million shares. Officials at Paulson did not immediately respond to a request for comment on current plans.
Six IPOs in the United States this week raised $16.9 billion, the second largest amount ever, behind the week of March 16, 2008, in which three IPOs, including Visa Inc (V.N), raised $19.7 billion. If overallotments options are exercised, this week's IPOs will have raised $19.4 billion, according to Thomson Reuters data.
Including the preferred shares sold as part of GM's IPO, this week's total could rise by as much as $5 billion.
Harrah's could not be reached for comment, nor could underwriters Goldman Sachs Group Inc (GS.N) or Deutsche Bank (DBKGn.DE).
Underwriters Citigroup (C.N), Bank of America Corp (BAC.N) and Credit Suisse CSGN.VX declined to comment.
Shares of Harrah's rival Las Vegas Sands (LVS.N) closed up 4.9 percent at $49.39 on the New York Stock Exchange. Shares of Wynn Resorts (WYNN.O) closed up 2.02 percent on the Nasdaq at $102.99.
(Additional reporting by Sweta Singh in Bangalore, Clare Baldwin and Walden Siew in New York; Editing by Anne Pallivathuckal, Phil Berlowitz and John Wallace)