We compute the exact one-loop partition function of ℤN orbifolds of Euclidean BTZ black hole with the aim to compute the entanglement entropy of the black hole horizon in string theory as a function of the mass and spin of the black hole and the AdS3 radius. We analyze the tachyonic contribution to the modular integrand for the partition function known for odd integers N > 1 and show that it admits an analytic continuation resulting in a finite answer for the modular integral in the physical region 0 < N ≤ 1. We discuss the flat space limit and the relevance of this computation for quantum gravity near black hole horizons and holography in relation to the thermal entropy.