LAS VEGAS (AP) - Harrah's Entertainment Inc. has been sued by
two bondholders who accuse the company of leaving them in the lurch
if it defaults on its debt or files for bankruptcy.
The lawsuit filed Jan. 9 in U.S. District Court in Delaware says
Harrah's is on the verge of bankruptcy and debt default.
"In an effort to ensure that only a limited class of individuals and entities reap the rewards of their debt investments in Harrah's to the detriment of other investors, defendants have completed bond tender offers that benefit those select individuals an entities to the exclusion of all others," attorney Joseph A. Rosenthal wrote in the complaint.
One of the plaintiffs, investor S. Blake Murchison, has also sued Station Casinos, saying its reorganization plan doesn't treat all bondholders fairly. The other plaintiff in the lawsuit is bondholder Willis Shaw.
The lawsuit names the company and members of its board of directors as defendants. Harrah's has not responded to the lawsuit in court. A spokesman for Harrah's told The Associated Press on Monday that the company does not comment on current litigation.
The company said in a regulatory filing last week that it has asked for $740 million from its banks under what remains of its $2 billion secured credit facility.
Also last week, the company said it planned to cut manager salaries 5 percent and suspend company matches for employee retirement benefits.
"Current economic conditions require that we act with speed and resolve," the company said in its statement announcing the moves.
"It is our hope that in the long term this action will benefit the stability of the company, and as a result all the affected employees individually."
The company said it hoped to reconsider those decisions if the
Harrah's lost $415.1 million in the first nine months of 2008 after earning $667.2 million during the same months in 2007. The company has not yet reported its fourth quarter earnings.
The company was bought out by Apollo Global Management LLC and
TPG Capital LP in January 2008 in a deal valued at $30.7 billion, including the assumption of $12.4 billion of debt and about $1 billion of costs.
Harrah's owns or manages about 50 casinos in six countries, and
has 20,000 rooms in Las Vegas, where the tourism market is currently struggling with consumer spending down.