Planet Hollywood reports worsening finances in quarter

By Steve Green

Friday, Aug. 14, 2009 | 2:19 p.m.

The owner of the 2,519-room Planet Hollywood resort on the Las Vegas Strip today said its financial position is deteriorating and that it may have trouble meeting its loan commitments.

Planet Hollywood also said that for the quarter ended June 30 it lost $12.07 million vs. a loss in the 2008 quarter of $12.2 million.

Revenue fell from $72.2 million to $60.6 million, as casino revenue for the quarter fell 8.5 percent to $28.3 million and hotel revenue was off 25 percent to $22.8 million.

Hotel occupancy fell 5.4 percentage points to 91.6 percent while the average daily room rate declined from $136 to $96.

On July 30, Moody's Investors Service placed a pool of structured debt securities under review for possible downgrade in part because of their exposure to Planet Hollywood.

Moody's said that despite a $178.4 million renovation and transformation project to re-brand the old Aladdin into the Planet Hollywood Hotel & Casino in 2006, the property has not met financial expectations.

"The slowing U.S. economy has led to reduced convention bookings and leisure/gaming demand. As a result, initial cash flow projections have not been reached," Moody's said, adding that for the trailing 12 months ending in March, the net cash flow was $28.9 million.

In a filing with the Securities and Exchange Commission today, Planet Hollywood's owner said it may have trouble servicing its $860 million commercial mortgage.

"Absent a capital contribution ... an equity investment by third parties or a restructuring of the loan agreement, we do not believe that cash generated from operations, cash held in reserve by the lenders under the loan agreement and cash made available under the modification to the loan agreement will be adequate to meet the anticipated working capital and debt service obligations of OpBiz (Planet Hollywood) through Dec. 31, including interest payments due on the loan for upcoming monthly payments," the company said.

"The company is currently seeking a modification of the loan agreement and access to funds in the interest reserve account, as well as additional capital investments to satisfy the requirements necessary to exercise (a loan) extension option or otherwise defer maturity of the loan and to provide funds to pay upcoming monthly interest payments," the company said.

As for the current slow business conditions in Las Vegas, Planet Hollywood said it doesn't expect much improvement during the rest of the year.

"Reduced casino volumes, a reduced demand for hotel rooms and a highly competitive market driving hotel rates down have all contributed to declines in the overall Las Vegas market. This slow down was particularly significant in the fourth quarter of 2008 and has continued into the second quarter of 2009. 2008 was the PH Resort’s first full year of operation as a rebranded property. We believe that second quarter 2009 operating results were negatively impacted by the current market conditions and that we will continue to experience lower than historical hotel occupancy, room rates and casino volumes in 2009. As a result, we have increasingly focused on efficiency initiatives to control expenses and improve performance," the company said.