Harrah’s Entertainment Inc. confirmed Monday that it has received a proposal from private equity firms Texas Pacific Group and Apollo Management to buy the company for $15.1 billion. The buyout firms are offering $81 a share in cash, a 22% premium to Harrah’s closing price Friday but below the $83.33 high point of the company’s shares over the past 12 months.

A deal for Las Vegas-based Harrah’s would be the largest step yet by private equity firms into the gambling business. It would rank as one of the largest leveraged buyouts in history and would follow a $21.3 billion deal for hospital operator HCA Inc. and an $14.8 billion deal for pipeline company Kinder Morgan Inc.

Bond investors viewed the news very unfavorably amid concerns a deal would increase Harrah’s credit risk as the company’s $10.2 billion in debt looks set to spiral. Harrah’s stock traded up 14.6% to $76.13, but remained well below the price in the proposal.

Equities investors are building in the risk of further negotiations on the buyout offer and, if it succeeds, an involved licensing process as new owners seek clearance to run gambling operations. The stock should continue to trade at a discount to the proposed buyout price in the near term, analysts said.

“The board has left the door open,” an analyst at BMO Capital Markets, Jeffrey Logsdon, said, noting there is no definitive agreement on the table and the company hasn’t made decision to sell. S&P equity analyst Tom Graves anticipated that a deal likely wouldn’t close until the second half of 2007.

A spokesman for Harrah’s couldn’t be reached for comment. In a statement, the company said a committee of independent board members “has not determined that a transaction is in the best interests of Harrah’s and its stockholders or that Harrah’s should not continue as an independent public company.”

The company’s 6.5% bonds due in 2016 fell 11 points to 86.75, or 86.75 cents on the dollar, in recent trading. The fact the bonds are being quoted in cents on the dollar rather than in terms of their yield is an indication the market thinks they will fall to junk.

Standard & Poor’s and Moody’s both rate Harrah’s at their lowest investment-grade levels. Analysts see a possible downgrade to single-B levels, at least four steps into junk-bond territory. Reflecting those concerns, the cost of insuring Harrah’s debt against default doubled from before the weekend. Five-year protection on $10 million in Harrah’s bonds was going for about $260,000 a year Monday afternoon, up from $120,000 a year at Friday’s close. The cost of protection peaked at $290,000 a year in morning trade.

Harrah’s operates 39 casinos around the country, including Caesars Palace and the Rio Hotel & Casino in Las Vegas.