Harrah's short-dated holders not lured by exchange

NEW YORK, Dec 22 (Reuters) - The majority of holders of Harrah’s Entertainment Inc’s short-dated debt failed to participate in its bond exchange, meaning the company may need to come up with another way to reduce debt or face a liquidity crunch when the bonds come due in 2010.

Harrah’s, the world’s largest gaming operator, said on Monday that around $6 billion of its bonds were offered into a debt exchange and tender but only $550 million of its $1.55 billion in bonds maturing in 2010 and 2011 were included.

The majority of holders of this debt also exchanged the bonds for cash instead of new, longer-dated debt, Harrah’s said.

Limited cash flow generation and tight liquidity make it likely Harrah’s will face liquidity challenges in 2010/2011, which would require the company to tap the debt markets to pay down bonds maturing in those years.

“The liquidity situation is quite serious,” said Christopher Snow, analyst at research firm CreditSights. “They were able to reduce debt through this process, but they’re going to have to do some other effort in the next 18 months to free up liquidity to get through the second half of 2010.”

Harrah’s is struggling with its debt load following its buyout by private equity firms Apollo Global Management and TPG Capital LP in January for $31 billion, including about $12 billion in debt, just after the peak of the leveraged buyout bubble.

The exchange had aimed to buy the company time to reverse operating losses as gambling revenues dry up. (Reporting by Karen Brettell; Editing by Leslie Adler)