Harrah's commercial mortgage-backed securities

According to a Securities and Exchange Commission, Apollo Management and Texas Pacific Group plan to transform some of Harrah's general land and property assets into one or more corporations in order to guarantee the acquisition efficiency.

The land, which symbolize a third of the company's income, will be used to borrow $7.25 billion in an acquaintance deal supervised by JPMorgan Chase.

Brian Gordon, chief at Applied Analysis stated that the deal will only strengthen the company, which in fact will remain the same. He also said that this strategy it's an ingenious way for the buyer to analyze the possessions of each of those components of the business so they can estimate the value of the land separately from the casino operations. It allows the general leverage to potentially rise for the entire company.

Even if this kind of funding, recognized as commercial mortgage-backed securities, is used in many major commercial transactions, it is a rather new method of doing business in the gaming industry.

John Restrepo, a principal at Restrepo Consulting Group also stated that this policy has been a great and old modality to purchase large real estate assets and it's just a relatively new method for financing the purchase of assets on a casino-resort.

The new companies will contribute with $2.9 billion cash each in the $17.1 billion purchase, with an extra assumption of around $10.7 billion in debt.

There are rumors that some of the assets, like the off-Strip Rio or properties in Louisiana or Iowa, could be sold to support some of the purchase debt.

Harrah's owns around 350 acres, developed and emergent, in Las Vegas plus different assets around the state and abroad. The company manages 47 casinos worldwide, including Harrah's, Caesars Palace, Bally's, Flamingo, Paris Las Vegas, Imperial Palace and the Rio in Las Vegas.

Harrah's will shortly purchase the Barbary Coast in a land exchange agreement with Boyd Gaming and will rename the land Bill's as a tribute to the company's founder, Bill Harrah.

So, what are Harrah's plans for the future?

Considering, the MGM Mirage's $7 billion Project CityCenter, actually under construction and Boyd Gaming Corp.'s $4 billion Echelon Place, many industry specialists think that any multimillion-dollar projects planned by Harrah's, like its strategy to build up a key center Strip resort project, will be delayed while the deal goes through its rigid difficulties.