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Bear Stearns Cuts Harrah's to 'Attractive'

Bear Stearns downgraded Harrahs Entertainment (HET) and Hollywood Casino (HWD).

Analyst Jason Ader says the largest gaming operators, including Harrah's Joliet & Hollywood Casino's Aurora, are expected to take the biggest hit as the state of Illinois raised its 35% tax rate on $200 million plus revenues to 50%. Ader notes the bill also raised the admissions tax to $3 per head from $2.

He downgrades Harrah's to attractive from buy although only 14% of EBITDA comes from Illinois, as he expects the stock to come under pressure as one of leading riverboat operators in the U.S. Ader also downgraded Hollywood Casino to neutral from buy as about 60% of property EBITDA comes from its from Aurora facility; he says he expects the increased tax to take about $20 million off his $133 million 2003 EBITDA estimate.

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