Swiss parent may be cutting funding for Summerlin resort

David Strow

Thursday, Sept. 28, 2000 | 10:58 a.m.

After more than a year of financial struggles, the Regent Las Vegas has halted payments on $120 million in high-yield bonds as its parent company in Switzerland apparently declined to continue covering all of the resort's losses.

Resort at Summerlin Inc. and its general partnership failed to make an interest payment of $3.9 million on its $120 million in senior subordinated notes on Sept. 15, putting the resort into default on the notes. The failed payment also puts the resort into default on $100 million in mortgage notes.

The company also said it has missed more than $1 million in lease payments on its gaming equipment, owned by PDS Financial Corp.

"The Partnership and the company believe that, pending a restructuring of their indebtedness, it is in the best interest of both the partnership and the company not to make the interest payments," the company said in a form filed with the Securities and Exchange Commission Wednesday. "The partnership and the company intend to initiate discussions with the holders of both the (subordinated) notes and the mortgage notes concerning a restructuring of this indebtedness."

The default will cause interest on the subordinated notes to accelerate from 13 percent to 15 percent annually.

Despite the halt in payments, Regent spokesman Denny Weddle said bankruptcy isn't being considered at this time, and that the Regent will continue operating as usual.

"What they're doing now is trying to find a way to redo the loans and the bonds, to restructure," Weddle said. "Except for a horrendous delay in construction ... I don't know if we'd be in the same situation. The bottom line is, (the delay) dramatically affects the profit-loss on a hotel-casino property."

That the resort finally missed an interest payment didn't surprise many. The biggest surprise appears to be that it hadn't occurred sooner.

"It was obvious these guys weren't making it," said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown.

Last November, the company warned that "available sources of capital are insufficient to meet presently forseeable capital requirements through the end of 1999." The company also warned it didn't believe it would generate the necessary cash flow to make interest payments in the future.

But the resort was temporarily saved by Swiss Casinos of America Inc., owner of the Regent through subsidiary Seven Circle Resorts Inc. From November 1999 to February, Swiss Casinos pumped $30.9 million into the Regent. The capital kept the resort afloat, but caused a default on the bonds that still has not been cured.

"They've continued (to make payments to Regent)," Weddle said. "I would assume they're finally saying, 'Why should we continue to do this? Let's let everyone share in the difficulties of this.'

"They are a large corporation, with interests in many areas. As a result, I'm sure they're saying they can't keep utilizing their profits from other entities to keep investing capital in one area."

The company's current financial performance is unknown. Since the November 1999 SEC report, Resort at Summerlin has not filed quarterly or annual financial reports with the SEC. Each time the company missed a required filing date, it stated that it was "attempting to conclude agreements which, if concluded as currently anticipated, will have a material effect on the content of (the company's) financial statements."

Officials of Seven Circles and Swiss Casinos couldn't be reached for comment on the apparent reduction of financial support of the Regent.