Harrah's purchaser giving loan to Barden
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The same company involved in the purchase of Harrah's Entertainment, one of the bidders for the Pittsburgh slots license, is lending money to Don Barden, the eventual winner of that license, to build his North Shore casino.
Apollo Strategic Value Fund LP, which has committed $150 million toward the slots parlor's financing, is part of Apollo Management, one of two private equity firms that acquired Harrah's for $17.1 billion.
In a statement released Monday evening, Mr. Barden said the $150 million from Apollo and a group of other lenders rounded out the permanent financing he needed for the casino. He estimated the total value of that funding at $780 million, slightly less than the $800 million he had described in a filing before the state gaming control board.
One analyst said yesterday Apollo's role in the financing conceivably could bring Harrah's back in the picture as part of the city's casino, nearly 18 months after it and Forest City Enterprises lost out to Mr. Barden and his company, PITG Gaming.
"It appears that this could be an avenue for Harrah's Entertainment to become somehow involved in the Majestic Star property. If in fact this is the way it works out, it could prove to be a very shrewd move by Harrah's," said Joseph Weinert, senior vice president of Spectrum Gaming Group, an industry consultant.
Harrah's was in line to operate a Station Square casino for Forest City Enterprises as part of that bid for the Pittsburgh license. Mr. Weinert said Harrah's possibly could end up with a similar role under Mr. Barden.
"It could be that they could become the operator of the property," he said. "They could have an equity stake. It remains to be seen. We don't know enough details at this point."
Bob Oltmanns, Mr. Barden's spokesman, had no comment on Apollo's role in the casino financing. Steven Anreder, an Apollo spokesman, confirmed that Apollo Strategic Value Fund was part of Apollo Management but declined further comment.
Mr. Barden has yet to file paperwork with the gaming board detailing the permanent financing for the project. The board must review and approve the financing.
He had been negotiating with Credit Suisse for $650 million in permanent financing for several weeks, but no mention of that was made in the statement released Monday. Nor did it say anything about another $150 million in financing he was trying to line up with a syndicate of banks headed by KeyBank National Association.
Mr. Weinert said Mr. Barden may have turned to Apollo out of necessity.
"The credit market right now is very difficult," he said. "It might simply be a case of Apollo coming to the rescue. It might have been the best hope of getting the financing for this. It could prove to be a win-win for Barden and Harrah's."
He added, "I think there are a lot of unanswered questions about the deal. But I think this is one a lot of people in the industry will be watching closely."
Another analyst, Gregg Klein of BNP Paribas Group, said Apollo simply may view the Pittsburgh casino "as an investment they're comfortable with" and cautioned against making too much of it.
"It's not as easy as saying if Majestic Star fails, Harrah's takes over," he said.
Harrah's already is 50 percent owner of the Chester Downs racetrack and casino near Philadelphia, but it doesn't appear as if state gaming laws would prohibit Apollo from lending money for the Pittsburgh project.
The law bars slots license holders from owning or having a financial interest of more than 33.3 percent in another casino in Pennsylvania. Even at $150 million, the Apollo loan would be less than 33.3 percent of the $780 million in financing for the Pittsburgh casino.
Whether the Apollo loan would be considered a financial interest depends on how it is structured and whether there's an ownership stake involved, gaming board spokesman Richard McGarvey said.
According to an Apollo Web site, the strategic value fund primarily invests in "the securities of leveraged companies in North America and Europe through distressed, value-driven and special opportunity investments."
Apollo Management teamed with Texas Pacific Group in 2006 to acquire Harrah's. After more than a year of review and approvals, the two closed on the deal in January.
First Published May 21, 2008 12:00 am