LOS ANGELES/NEW YORK (Reuters) - 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.
Watch Casino Online
