Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

Note 11—Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The following table shows the fair value of our financial assets and financial liabilities that are required to be measured at fair value as of June 30, 2011 and December 31, 2010.

(In millions)	Balance			Level 1		Level 2			Level 3
June 30, 2011
Assets:
Cash equivalents	$	42.7		$	42.7	$	—		$	—
Restricted cash		442.8			—		442.8			—
Investments		105.2			102.9		2.3			—
Derivative instruments		0.7			—		0.7			—
Liabilities:
Derivative instruments		(354.9	)		—		(354.9	)		—
December 31, 2010
Assets:
Cash equivalents	$	175.7		$	175.7	$	—		$	—
Investments		95.4			92.7		2.7			—
Derivative instruments		16.8			—		16.8			—
Liabilities:
Derivative instruments		(359.3	)		—		(359.3	)		—

The following section describes the valuation methodologies used to estimate or measure fair value, key inputs, and significant assumptions:

Cash equivalents – Cash equivalents are investments in money market accounts with a maturity of 90 days or less at the date of purchase and use Level 1 inputs to determine fair value.

Restricted cash – Restricted cash includes investments in commercial paper that are valued using Level 2 inputs. All amounts are included in either Prepayments and other current assets or Restricted cash in our Consolidated Balance Sheets.

Investments – Investments are primarily debt and equity securities with a maturity date greater than 90 days at the date of the security's acquisition. The majority of these securities are traded in active markets, have readily determined market values and use Level 1 inputs. Those debt and equity securities for which there are not active markets or the market values are not readily determinable are valued using Level 2 inputs. All of these investments are included in either Prepayments and other current assets or Deferred charges and other in our Consolidated Balance Sheets.

Investments in marketable securities were as follows:

	June 30, 2011				December 31, 2010
(In millions)	Fair Value		Unrealized Gains/(Losses)		Fair Value		Unrealized Gains/(Losses)
Corporate bonds	$	2.3	$	0.1	$	2.7	$	0.1
Equity		2.9		0.6		2.6		0.5
Government bonds		98.0		2.9		88.0		2.1
Mortgaged backed securities		—		—		0.1		—
Other liquid investments		2.0		—		2.0		—
Total Investments	$	105.2	$	3.6	$	95.4	$	2.7

Derivative instruments – The estimated fair values of our derivative instruments are derived from market prices obtained from dealer quotes for similar, but not identical, assets or liabilities. Such quotes represent the estimated amounts we would receive or pay to terminate the contracts. Derivative instruments are included in either Deferred charges and other, or Deferred credits and other, in our Consolidated Condensed Balance Sheets. Our derivatives are recorded at their fair values, adjusted for the credit rating of the counterparty if the derivative is an asset, or adjusted for the credit rating of the Company if the derivative is a liability. See Note 6, "Derivative Instruments" for more information.

Items Disclosed at Fair Value

Long-Term Debt – The fair value of the Company's debt has been calculated based on the borrowing rates available as of June 30, 2011 for debt with similar terms and maturities, and based on market quotes of our publicly traded debt. As of June 30, 2011, the Company's outstanding debt had a fair value of $19,876.5 million and a carrying value of $19,584.0 million. The Company's interest rate swaps used for hedging purposes had fair values equal to their carrying values; in the aggregate a liability of $354.9 million. Our interest rate cap agreements had a fair value equal to their carrying value as an asset of $0.7 million at June 30, 2011. See additional discussion about derivatives in Note 6, "Derivative Instruments".

Interest-only Participations – Late in 2009, a subsidiary of CEOC acquired certain interest only participations payable by certain predecessor entities of PHW Las Vegas. When the Company assumed the debt in connection with the acquisition of Planet Hollywood, these interest only participations survived the transaction and remain outstanding as an asset of a subsidiary of CEOC as of June 30, 2011. In connection with both the initial acquisition of the interest only participations and the acquisition of Planet Hollywood, the fair value of these participations was determined based upon valuations as of each date. As the Company owns 100.0 percent of the outstanding participations, there is no active market available to determine a trading fair value at any point in time subsequent to the acquisition. As a result, the Company does not have the ability to update the fair value of the interest only participations subsequent to their acquisition and valuation, other than by estimating fair value based upon discounted future cash flows. Since discounted cash flows were used as the primary basis for valuation upon their acquisition and are also being used as the method to determine the amortization of the value of such participations into earnings, the Company believes that the book values of the interest only participations at June 30, 2011 approximate their fair values.