Correction: Fitch Rates Harrah's 5.5% Senior Notes 'BBB-'; Restated Bank Facility Indicative 'BBB-'.

NEW YORK -- (This is an amended version of a press release issued earlier today, containing revised information in the headline.)

Fitch Ratings has assigned a rating of 'BBB-' to Harrah's (HET) sale of $650 million in 5.5% senior unsecured notes due July 2010 and an indicative rating of 'BBB-' to HET's proposed amended and restated $2.5 billion revolving credit agreement. Ratings reflect HET's strong brands, stable free cash flow generation, geographic diversity, industry-leading customer loyalty programs, and strong track record of integrating acquisitions. Risk factors include integration risks associated with the Horseshoe Gaming acquisition, a potential run-up in leverage due to future acquisitions or development opportunities, potential regulatory changes and/or tax increases (particularly in riverboat jurisdictions), and longer term competitive threats to Illinois, Atlantic City, and Northern Nevada. New competition in Atlantic City (The Borgata) and California and higher taxes in Illinois and Indiana continue to pressure results. Proceeds from the notes will be used to term out a portion of the revolver borrowings utilized to execute the $1.45 billion Horseshoe acquisition, which is expected to close July 1, 2004. The bank facility and new notes will rank pari passu with all outstanding senior unsecured debt. The Rating Outlook remains Stable.

With approval for the Horseshoe acquisition by the Federal Trade Commission and state regulatory agencies in place as of mid-June, the acquisition is on track to close on July 1, 2004. Credit measures post-acquisition are expected to remain solid, with pro forma latest twelve months leverage projected at 3.8 times (x) (versus actual leverage of 3.4x first quarter-end 2004).

Over the next several years, Fitch expects growth capital expenditures, share repurchases, and dividend payments to exhaust a significant portion of free cash flow, but credit measures should continue to benefit from improving operating results. Capital expenditures are expected to be in the $550 million range in 2004. In addition to Horseshoe-related expenditures, current spending plans include hotel and amenities expansions in New Orleans ($142 million; expected completion in mid-2006), North Kansas City ($107 million; expected completion at the end of 2005); and Harrah's St. Louis ($80 million; expected completion in the third-quarter of 2004).

HET's strong liquidity position provides flexibility within the rating category to act on opportunistic acquisition and development opportunities not included in current projections. Major internal capital projects in the coming years are likely to include a new full-scale development on the Las Vegas Strip and additional hotel supply in Atlantic City, Kansas City, and Iowa. Other opportunities (dependent on gaming expansion) include a potential $600 million casino in Rhode Island, track ownership/video lottery terminals in Michigan, Ohio, and Kentucky, and casino projects in the UK. Heavier-than-expected expansionary capex, share repurchase activity, or another acquisition could mark a shift in HET's conservative financial policy, and could warrant revision of the rating or Outlook. However, historically HET management has managed maintained credit measures consistent with the rating. The occasional spike in leverage related to acquisition activity has historically been followed by a focused debt reduction effort. Comfort is also drawn from management's stated willingness to raise equity to maintain its investment-grade rating. Additionally, Fitch notes the highly discretionary nature of HET's free cash flow, which can be curtailed if operating results decline.

The amended and restated bank facility will upsize and extend the existing credit agreement to accommodate the pending $1.45 billion acquisition of Horseshoe Gaming and expand liquidity. The existing $1.9625 billion facility (which consists of a five-year revolver for up to $1.0625 billion and a five-year reducing term facility for up to $900 million) will be increased to $2.5 billion and converted to an all-revolving structure and may be increased to $3 billion with lender approval. The proposed senior notes offering along with proceeds from the $190 million sale of Harrah's Shreveport (which closed May 19, 2004) will also be used to fund the Horseshoe transaction and pay down borrowings under the revolver. After funding the Horseshoe acquisition, HET should have ample liquidity with more than $2 billion of unused revolver capacity. Aggregate annual maturities over the next several years total $614.6 million in 2005, $54.2 million in 2006, $605.5 million in 2007, and $819.6 million in 2008. Fitch believes the company will also look to refinance $533 million in higher cost Horseshoe debt in 2004 that it will inherit upon closing of Horseshoe.

Harrah's reported first quarter 2004 EBITDA of $272.7 million, relatively flat with prior-year results. The company reported strong results in both the Western Region (+18.5% to $100.7 million) due to strong demand on the Las Vegas Strip and generally positive results in Atlantic City (+4.8% to $61.2 million) where a 544-room hotel expansion at the Showboat helped offset the impact of new competition (The Borgata). These increases buffered losses in the North Central Region (-15.1% to $74.2 million), which continues to be affected by higher taxes in Illinois and Indiana and competitive pressures in Missouri and the South Central Region (-0.7% to $42.2 million), which was slightly down despite incremental results from Louisiana Downs. On an LTM basis, Fitch estimates leverage and interest coverage remained flat with fiscal year-end 2003 at 3.4x and 4.6x, respectively. The company paid roughly $33.5 million in dividends but did not repurchase any shares (500,000 shares were purchased in 2003). Approximately 2.5 million remain under the existing authorization.