Harrah’s Pulls $531 Million Private Equity-Backed IPO

Harrah’s Entertainment Inc. (CZR), the world’s biggest casino operator, terminated its $531 million initial public offering, the first private equity-backed company to pull its U.S. IPO in six months.

Harrah’s, taken private by Apollo Global Management LLC (APO) and TPG Capital in a leveraged buyout in 2008, canceled its sale because of “market conditions,” according to the Las Vegas-based company’s statement today. The postponement was the first from a private equity-backed company since Americold Realty Trust, owned by billionaire Ron Burkle’s Yucaipa Cos., shelved its offering in May, data compiled by Bloomberg and Greenwich, Connecticut-based Renaissance Capital LLC showed.

The IPO by Harrah’s was the last of four planned by private equity-backed companies in the biggest week for U.S. initial sales since March 2008. Almost 40 percent of IPOs led by buyout funds left buyers with losses this year, while the Standard & Poor’s 500 Index (SPX) posted its biggest one-day slump since August this week.

“Market conditions have been pretty volatile,” said Wayne Wilbanks, chief investment officer at Wilbanks, Smith & Thomas in Norfolk, Virginia, which manages about $1.6 billion. “The market will still be picky about some of these super-leveraged” deals, he said.

Leon Black’s New York-based Apollo and David Bonderman’s TPG took Harrah’s private for $30.7 billion, including debt and transaction costs, in January 2008. Harrah’s intended to change its name to Caesars Entertainment Corp., according to its filing with the Securities and Exchange Commission.

Harrah’s Bonds

Harrah’s planned to offer 31.3 million shares for $15 to $17 each, its filing said. The shares scheduled to be sold in the IPO were in addition to $710.3 million of stock registered for sale by John Paulson’s Paulson & Co. hedge fund. He agreed in June to acquire almost 10 percent of Harrah’s by swapping bonds bought at a discount.

Harrah’s $3.3 billion of 10 percent bonds due in December 2018, rated CCC by Standard & Poor’s, slid 2.25 cents to 86 cents on the dollar as of 5:04 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt has fallen from as high as 93.5 cents on Nov. 5.

The Harrah’s LBO had closed as a deepening financial crisis spurred the worst recession since the Great Depression and froze deal-making in the buyout industry.

Restructured Debt

The casino operator’s private equity owners had cut the company’s debt by more than $4 billion in the past two years by offering creditors new bonds at a discount for their old notes, buying back other debt for less than face value and extending maturities on $5.5 billion in loans.

Apollo’s holdings include Parsippany, New Jersey-based Realogy Corp., while TPG participated in some of the biggest LBOs of the buyout boom that preceded the credit crunch. They included the record takeover of TXU Corp. in 2007, a deal valued at $43.2 billion, including assumed debt.

Among other private-equity backed IPOs this week, Aeroflex Holding Corp. (ARX), the maker of semiconductors owned by Golden Gate Capital, Veritas Capital, and a Goldman Sachs Group Inc. buyout fund, closed unchanged today in its first day of New York Stock Exchange trading.

Aeroflex sold 17.25 million shares at $13.50 each yesterday, the low end of its price range. Goldman Sachs of New York and Zurich-based Credit Suisse Group AG led the IPO.

Booz Allen, LPL

Booz Allen Hamilton Holding Corp. and LPL Investment Holdings Inc. (LPLA), both backed by private equity firms, had first-day advances of at least 7 percent this week after their IPOs, while General Motors Co. (GM) sold $20.1 billion of common and preferred stock.

LPL of Boston and McLean, Virginia-based Booz Allen rose more on their first day of trading than the average private-equity backed IPO. U.S. companies sold by buyout firms have gained an average of 1.2 percent in their stock-market debuts, data compiled by Bloomberg show. Companies without private-equity ownership climbed 9.4 percent on average, the data show.

Separately, Lizhan Environmental Corp. (LZENF), a manufacturer of synthetic leather from recycled leather waste, priced 2.5 million shares at $4 each today. The Tongxiang, China-based company had offered 1.82 million shares at $5 to $6 each, an SEC filing showed. The shares rose 0.3 percent in trading today.

The sales were among 10 initial offerings scheduled this week. The largest came from GM, which sold $15.8 billion of common stock, almost 50 percent more than the Detroit-based company initially sought, data compiled by Bloomberg show. The automaker also sold $4.35 billion of preferred shares.

The IPO was the second-largest in U.S. history after San Francisco-based Visa Inc.’s (V) $19.7 billion offering in March 2008, data show. GM’s shares, which were sold at $33 apiece, rose 3.6 percent to $34.19 in the company’s stock-market debut yesterday and advanced 0.2 percent to $34.26 today.

To contact the reporters on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net.

To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net.

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