TPG and Apollo make bad casino investment
By the time buyout shops Texas Pacific Group and Apollo Management officially took over Harrah's, the world's largest casino operator, in January, the deal was starting to look less like private equity's ascension to the top of the business world and more like an idea gone horribly awry. Casinos, long held to be "recession-proof," haven't proved so lucky this time. Falling revenue, combined with a whopping $24 billion debt load, much of it from the take-over, have driven Harrah's into the red for the better part of a year. By the summer, Apollo and TPG were writing down their $1.3 billion stakes by 20% to 25%, but the situation could already be much worse. One co-investor has written down the value of its equity investment by some 75%. There are better odds at roulette.