SecProbe.io

CORRESP
1
filename1.htm

November 21, 2005

VIA EDGAR AND HAND DELIVERY

Ms. Heather
C. Tress

Division
of Corporation Finance

United
States Securities and Exchange Commission

100
F Street, N.E.

Washington,
DC  20548

  Re:

  Hard Rock Hotel, Inc.

  Form 10-K for the year ended December 31,
  2004

  Filed March 31, 2005

  File No. 333-53211

Dear Ms. Tress:

On behalf of Hard Rock Hotel, Inc.
(“Hard Rock” or “the Company”), we are responding to the Staff’s comment letter
dated October 5, 2005 regarding the Form 10-K referenced above.  As requested, we have set forth below the
Staff’s comment and Hard Rock’s response to such comment.

Financial Statements, page 37,

Statements of Operations, page 40

1.               We note that you have reflected the loss on
disposal of assets as a component of other income (expense) net.  Please tell us why this loss was not
classified as a component of operating income.
Refer to the guidance outlined in paragraphs 25 and 45 of SFAS No. 144
and footnote 68 to SAB Topic 13.

Response:                                        The
Company agrees with the Staff’s comment that the loss on disposal of assets
should be classified as a component of income from operations.  The Company will reflect this
reclassification in its future filings.

Notes to Consolidated Financial Statement, page 44

Note 1. Company Structure and Significant Accounting Policies, page 44

Long-term Asserts, page 30

2.               We note from page 24 that you consider
the evaluation of impairments to your long-lived assets a critical accounting
policy due to the significant investments in property and equipment you
hold.  Your disclosure states that you
will record an impairment if the useful life of a class of assets differs from
the estimated useful life.  Please note
that the useful life is considered in the estimates of future cash flows used
in the recoverability test and is also a possible indicator of impairment if
the useful life has declined.  However,
the change in the useful life of an asset is not a factor which will
necessarily result in an impairment.
Please clarify for us how your accounting for impairments of long-lived
assets complies with paragraphs 16 through 24 of SFAS 144 and confirm that the
test revealed no such impairments in 2002, 2003, and 2004.  Please also confirm, and clarify in future
filings, that

you review long-lived assets for impairment whenever
events or changes in circumstances indicate that carrying amounts may not be
recoverable.

Response:                                        In accordance with paragraph 8 of SFAS 144, the
Company tests long-lived assets for recoverability whenever events or changes in
circumstances indicate that their carrying values may not be recoverable.  The only such circumstances occurring during
the three years ended December 31, 2004 were the abandonment of building
improvements and equipment in connection with the construction of a new night
club during 2004, resulting in a loss on disposal of assets of $2,608,000, and
the abandonment of building improvements and furniture in connection with the
renovation of certain guest rooms during 2002, resulting in an abandonment loss
of $1,730,000.  The fair value of the
abandoned assets was zero and the impairment write-down therefore represented
the entire net book value of the assets.

The disclosures on page 24 in Critical
Accounting Policies and page 44 in Note 1 will be revised in future
filings as follows:

“The Company has a significant investment in
long-lived property and equipment.  The
Company reviews the carrying value of property and equipment to be held and
used for impairment whenever events and circumstances indicate that the
carrying value of an asset may not be recoverable from the estimated future
undiscounted cash flows of the asset.  If
the undiscounted cash flows are less than the carrying value, an impairment
loss is recognized equal to the amount by which the carrying value exceeds the
fair value of the asset.  For assets to
be disposed of, the Company recognizes the asset to be sold at the lower of
carrying value or fair value less costs of disposal.”

Note 12. Preferred Stock, page 51

3.               We note the disclosure in Note 12 indicating
that the Company exchanged all of its outstanding preferred stock and the
related accrued unpaid dividends thereon for an aggregate principal amount of
Qualified Subordinated notes equal to approximately $50 million during May 2003.  Please tell us and explain in the notes to
your financial statements in future filings whether this exchange transaction
resulted in the recognition of a gain or loss in the Company’s consolidated
financial statements.  If not, please
explain why.  As part of your response,
please indicate the rights, terms, and privileges of the preferred stock that
was redeemed in this transaction and the carrying value of the preferred stock
and related dividends exchanged as part of this transaction.  Your response should also explain how you
determined that the fair value of the preferred stock redeemed was equal to the
fair value of the Qualified Subordinated notes issued in the exchange
transaction.  We may have further comment
upon receipt of your response.

Response:                                        The Company will clarify
in the notes to the financial statements in its future filings why
the exchange transaction described below did not result in the recognition of a
gain or loss in the Company’s consolidated financial statements.  As discussed more fully below, this
transaction did not result in

2

the recognition of a gain or loss to the Company as the
market value and face amount of the subordinated notes issued in exchange for
the Company’s outstanding preferred stock equaled the aggregate carrying and
redemption value of such preferred stock.

Terms of the Series A Cumulative Redeemable
Preferred Stock

In 1999, the Company issued and sold to Peter
Morton, the Chairman of the Board and President of the Company, 28,000 shares
of the Company’s 9 ¼% Series A Cumulative Redeemable Preferred Stock
(the “Series A Preferred Shares”), with an aggregate liquidation
preference of $28.0 million.  The Series A
Preferred Shares were entitled, when and as declared by the Board of Directors
of the Company, to receive cumulative cash dividends at the rate of 9 ¼%
per annum.  Dividends on the Series A
Preferred Shares were payable semi-annually on November 30 and May 31
of each year, beginning November 30, 1999.  Upon the liquidation, dissolution or winding
up of the Company, each Series A Preferred Share was entitled to be paid
in full an amount equal to $1,000 per Series A Preferred Share, plus any
accrued and unpaid dividends thereon through the date of liquidation.  Under the terms of the Series A
Preferred Shares, the Company was required to redeem for cash all of the Series A
Preferred Shares within 91 days following the earlier of April 1, 2005 or
the repayment of the Company’s 9 ¼% Senior Subordinated Notes due April 1,
2005 (the “Old Notes”), at a redemption price equal to $1,000 per Series A
Preferred Share plus any accrued and unpaid dividends thereon.  In addition, to the extent that a holder or
the beneficial owner of the Series A Preferred Shares must be licensed or
found suitable under applicable gaming laws and such holder or beneficial owner
could not otherwise comply with such licensing or suitability requirements, the
Company could, at its option, (1) require such holder or beneficial owner
to dispose of its Series A Preferred Shares or (2) redeem all of such
Series A Preferred Shares at a redemption price of $1,000 per Series A
Preferred Share, plus any accrued and unpaid dividends thereon.  The Series A Preferred Shares did not
have any voting rights, except as required by law or as to certain matters
adversely affecting the Series A Preferred Shares, including the
designation and issuance of any capital stock senior to the Series A
Preferred Shares.  The carrying value of
the Series A Preferred Shares equaled the aggregate liquidation preference
thereof and the accrued dividends thereon.

Terms of the Series B Cumulative Redeemable
Preferred Stock

In 2000, the Company issued and sold to Peter
Morton, the Chairman of the Board and President of the Company, one share of
the Company’s 9 ¼% Series B Cumulative Redeemable Preferred Stock
(the “Series B Preferred Share” and, together with the Series A
Preferred Shares, the “Preferred Shares”), with an aggregate liquidation
preference of $20.0 million.  The Series B
Preferred Share had substantially the same dividend, liquidation, redemption
and voting rights as the Series A Preferred Shares.  In addition, the Series B Preferred
Share was subject to the same mandatory redemption.  The carrying value of the Series B
Preferred Share equaled the aggregate liquidation preference thereof and the
accrued dividends thereon.

3

The Second Lien Notes

In 2003, the Company issued at face amount (i.e., no
premium or discount) $140.0 million aggregate principal amount of 8 7/8%
Second Lien Notes due 2013 (the “New Notes”) in a Rule 144A offering requiring
the Company to repurchase the Old Notes and redeem its Preferred Shares.  The Company used the proceeds from the
offering of the New Notes and borrowings under its bank facility (the “Facility”)
to, among other things, repurchase the Old Notes and to repay a portion ($15.0
million) of the accrued and unpaid dividends on the Preferred Shares.

Terms of the Junior Subordinated Notes

In
exchange for the Preferred Shares and remaining accrued and unpaid dividends
thereon (aggregating $50.1 million), the Company issued the holders of the
Preferred Shares $50.1 million initial aggregate principal amount of its Junior
Subordinated Notes (the “Junior Notes”).
The Junior Notes are contractually subordinated to
the New Notes and the Facility and any other senior debt of the Company.
The Junior Notes mature on January 15, 2014 but are subject to redemption
at the option of the Company, in whole or in part, at any time on or after January 15,
2009, at a premium to the principal amount thereof that decreases on each
subsequent anniversary date, plus accrued interest to the date of
redemption.  Interest on the Junior Notes
is payable on January 15 and July 15 of each year, commencing on January 15,
2004, and may be paid in cash or in kind at the Company’s option, provided that
interest will be paid in kind if a payment of such interest in cash would cause
a default under the New Notes or the Facility.  The Junior Notes require
that any semi-annual interest payment in cash be equal to the lesser of (x) 50%
of the amount of interest accrued on the Junior Notes since the most recent
interest payment date and (y) the amount of interest that the Company is
permitted to pay in cash without causing a default under the New Notes or the
Facility.  For interest payments payable in cash, interest accrues at a
rate per annum equal to 9 7/8%,
and for interest payments payable in kind, interest accrues at a rate per annum
equal to 10 ½%.

Fair Value of the Junior Subordinated Notes Compared
to Carrying Value of the Cumulative Redeemable Preferred Stock

As discussed above, in May 2003, the Company
redeemed all of the outstanding Preferred Shares and paid all accrued
dividends.  The sources of funds to
redeem the Preferred Shares and related accrued dividends were as follows:

  Principal

  Accrued

  Balance

  Dividends

  (Millions)

  Preferred Shares Outstanding Balance May 2003

  $

  48.0

  $

  17.1

  Sources of Payment:

  Proceeds from Second Lien Notes &
  Facility

  (15.0

  )

  Principal Amount of Junior Subordinated
  Notes

  (48.0

  )

  (2.1

  )

4

The Company issued the Junior Notes at a fair market
value interest rate given the relative terms of the Junior Notes to the New
Notes which would result in the face amount of the Junior Notes being equal to market
value.  The interest rates on the Junior
Notes were determined based upon advice from the lead initial purchaser, an
affiliate of a major financial institution, in the Rule 144A offering who advised
that, at the time, subordinated notes of other issuers (in this case, the
Junior Notes) with similar terms were bearing an interest rate approximately 1%
higher than their senior notes (in this case, the New Notes) for interest to be
paid in cash and an additional ½% to 1% for interest to be paid in kind.  The interest rates for cash payments on the
Junior Notes of 9 7/8% (1% above the 8 7/8%
New Notes) and 10 1/2%
for interest paid in kind (1 5/8% above the 8 7/8%
New Notes) were therefore determined to approximate current market rates for
subordinated debt with these terms.

Please contact the
undersigned at (213) 687-5527 or Gregg Noel at (213) 687-5234 if you have any
questions or comments regarding this letter.

  Very truly yours,

  /s/ Jonathan Ko

  Jonathan Ko

  cc:

  Jim Bowen – Hard Rock Hotel, Inc.

  Gregg Noel, Esq. – Skadden, Arps, Slate, Meagher & Flom
  LLP

  Larry Krause – Deloitte & Touche LLP

5