$20 Billion Harrah's/Caesar's debt

World's biggest casino owner set to raise $532M

NEW YORK -- Investors will get another chance to roll the dice on the world's biggest casino operator next week. It may be a risky bet, according to some observers.

Caesars Entertainment Corp. - formerly Harrah's Entertainment ( HET - news - people ) - plans to raise as much as $532 million with an initial public offering.

Its shares will start trading at a financially precarious time for the casino business. Like the rest of the industry, Caesars hit a wall during the recession as people opted to save their extra cash rather than gamble it. Results for the first nine months of this year suggest the high rollers haven't come flocking back.

In a recent securities filing, the company said it lost $634.4 million during the nine months ended Sept. 30.

On top of that, Caesars is burdened with close to $20 billion in debt. A lot of it was piled on by the two private equity firms - Apollo Management Group and Texas Pacific Group - that took the company private three years ago and that plan to keep control of it after the IPO.

Francis Gaskins, president of the research firm IPOdesktop, noted that Caesars is spending 22 percent of its revenue on interest payments.

Apollo and Texas Pacific took Caesars private in a $30.7 billion deal back in 2007, a takeover that ranked as one of the biggest leveraged buyouts in corporate history. The company owns more than 50 casinos in 12 states and seven countries, from Egypt to Uruguay.

The company's filings show revenue hit a peak the year of the buyout at $10.8 billion, then tumbled 6 percent to $10.1 billion in 2008. The downturn resulted in a $5.5 billion net loss for the year as the company took accounting charges to write off the value of its assets.

Revenue dropped another 12 percent to $8.9 billion in 2009, but cost cutting helped preserve a $473 million profit for the year.

Caesars says the IPO next week will help it expand. It plans to use the cash to continue construction of the 660-room Octavius hotel tower at Caesars Palace on the Las Vegas Strip, halted last year after just its exterior was finished.

It also wants to fund a joint venture in Ohio with Rock Gaming LLC and add an entertainment and dining area linking the Imperial Palace and Flamingo casinos on the Strip's east side.

Caesars is selling 31.3 million shares for $15 to $17 each, which works out to as much as $532.1 million. It plans to trade on the Nasdaq exchange under the symbol "CZR."

Together, Apollo and Texas Pacific will hang on to an 81 percent stake in the company.