gaming:

Riviera gets notice of technical default; stock tumbles

Steve Marcus

A view of the Riviera on the Las Vegas Strip on Dec. 26, 2007.

By Steve Green (contact)

Published Wednesday, March 4, 2009 | 8:37 a.m.

Updated Wednesday, March 4, 2009 | 2:19 p.m.

Riviera

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Riviera

Financial pressures are increasing for the owner of the Riviera hotel-casino in Las Vegas and the company's stock sunk to a 52-week low today on news that it's in technical default on a $245 million line of credit.

Riviera Holdings Corp. said it received a notice of technical default by Wachovia Bank, which administers the credit facility, because of Riviera's refusal to give Wachovia access to the operating cash in Riviera's bank accounts. The default has triggered a higher interest rate of unspecified magnitude on the debt.

The stock of Riviera Holdings, which also owns a casino in Black Hawk, Colo., fell 31 cents on the news to close at $1.91 and traded earlier in the day at a 52-week low of $1.65. It traded as high as $22.87 in March 2008 before the recession dramatically reduced visitation to Las Vegas.

Most recently, the La Cage show and the Ristorante Italiano closed at the Riviera in Las Vegas as visitation to the property decreased.

Riviera Holdings Chairman and Chief Executive William Westerman said in a statement today that the loan default is technical, not financial, as the company is current with the credit agreement's interest and payment obligations. But Riviera Holdings suggested the higher interest expenses may trigger additional problems for the company

"The company has funds on hand and is continuing to generate sufficient cash to pay all operating obligations in a timely manner, as well as make necessary investments in its Las Vegas and Black Hawk properties in order to meet minimum capital maintenance requirements,'' Riviera Holdings said.

"Despite experiencing the impact of a severe economic recession, the company's objective has been to remain current with all of its financial commitments, including interest obligations associated with the Credit Agreement. That being said however, due to the increased interest burden in the form of default interest now imposed on the company as a result of this alleged technical default, the company will have to reassess this objective,'' Riviera said.

Riviera said Wachovia requested that Riviera execute a cash deposit agreement that Riviera found to be unreasonable because it would enable Wachovia to access all of Riviera's operating cash and order it to be transferred to a bank account specified by Wachovia.

"Wachovia could gain access to all cash held in Riviera's bank accounts by merely advising the banks of a notice of default without first allowing us the opportunity to cure the default, no matter how trivial. Since receipt of the Oct. 14, 2008 request, we have unsuccessfully attempted to negotiate a (deposit agreement) with Wachovia that provides for adequate going concern protections for the company. We remain willing to enter into a reasonable (agreement) which would provide our lenders with access to the cash in the company's bank accounts as collateral, as long as we are able to maintain reasonable access to that cash in order to pay normal operating expenses necessary to continue business."

Rivera Holdings has not yet reported financial results for the fourth quarter of 2008. For the third quarter ended Sept. 30, the company said revenue fell 23 percent to $40.2 million and that it lost $3.5 million.

Steve Green can be reached at 990-7714 or steve.green@hbcpub.com.

Discussion: 17 comments so far…

By doubledown_deadender

3/4/09 at 9:26 a.m.

Suggest removal

The Karma! The Irony!

Casinos unable to pay their gambling debts...
By rejco100

3/4/09 at 10:02 a.m.

Suggest removal

See 'er Later.
By stevem

3/4/09 at 10:10 a.m.

Suggest removal

this place should have been imploded 10 years ago. what a dump.
By jfnance32

3/4/09 at 10:15 a.m.

Suggest removal

Is there going to be any major casino company who is not going to default on its debts payment?

I think this will send a very loud message to investors across the planet.

Do not fund casinos.

I think it will be decades before we see any new major investment in casino development.

So many bond holders are getting burned.
By James_P_Reza

3/4/09 at 10:27 a.m.

Suggest removal

Plenty of businesses outside of gaming are defaulting on debt. It's easy to pick on Vegas, as it always has been. Ho-hum. If this economic situation passes, as it likely will, Las Vegas will be just fine. If it gets worse, we have a lot more to worry about worldwide than the Riviera stock price.
By ksand99

3/4/09 at 10:29 a.m.

Suggest removal

"Is there going to be any major casino company who is not going to default on its debts payment?"

If I were to wager? Wynn.
By gqbossing

3/4/09 at 10:33 a.m.

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Just too much debt... This company will most likely be fine though, their technical default is a bargaining tool used by Wachovia to renegotiate seinority and other factors of debt to protect themselves. The Riveria is still seeing operating profit, which is all that really matters.

Of the casino companies in Las Vegas, the ones which aren't having financial trouble (publicicly that is) are Casino Royale, Planet Hollywood, Stratoshpere including the Arizona Charlies and like properties, Cannery, South Pointe, Wynn, Boyd (since they stopped Echelon), Sahara and the Hard Rock.

Ones that are: , MGM, Tropicana, Harrahs, Hooters, Sands, Terrible Herbst, Riveria and Stations.
By jfnance32

3/4/09 at 10:41 a.m.

Suggest removal

You are probably right.

I wonder why my grandparents who lived through the Great Depression only put their money in low return very safe investments like banking CD's.

If they only invested in stocks and bonds then they would have generated millions in wealth.

They did not. My guess is that their "investments" barely edged out inflation by .5% to 1%.

Now, I can see why.

This deeped recession will do the same thing.

This generation of investors will shy away from more risky bonds and stocks for a long time.

It is sad and the wrong move but I can see why.

Banking or credit crisis seemed to occur every 70 to 100 years. I believe this at least the 4th "panic" that has occurred in the USA. All had some "credit" bubble part to it.

I think what happens is one generation experiences a "credit" lead economic panic. They have wisdom to prevent another one. That generation dies off. The new generations over extends credit and boom...a credit lead "panic".

The moral of the story....around 2080...our children and grandchildren should pull their money out of stocks and bonds and wait for a "panic" and then buy cheap stocks and bonds.

Deep recessions, panics, or depressions seem to be a natural occurring cycle.
By DevalXVI

3/4/09 at 12:14 p.m.

Suggest removal

Hang in there jfnance32, I have plenty of safe cash on the sidelines, but still continue to invest, dam the torpedo's, I'll keep firing even if I go down with the ship!
By BorisR

3/4/09 at 12:41 p.m.

Suggest removal

The little casinos are the big gainers in this "economical turmoil". The little ones, such as perhaps the Long Horn, the few ones in Hendersson (without the Fiesta Mega Machine) and perhaps little downtown holes might survive even under lesser tourist traffic. The BIG ONES, such as Harrah's with appro 26 billion in debt and LVS with about 15 billion in debt, how in this world do they expect to survive? LVS has to "win" just 1.5 to 2 billion a year just to pay the interests....and only then they're getting into the zone. I think that's Mission Impossible, even with the Marina Bay Sands in Singapore....
By stevem

3/4/09 at 12:54 p.m.

Suggest removal

it's visitor volume, folks. nothing more, nothing less. we're now at around 15% year over year decrease in people flying in and that little difference is just enough to wreck the balance sheet of these places.

stratosphere announced layoffs today, so even that place with what i would think would be low overhead and debt isn't doing well.

also, look really close at that photo at the top there of the riviera. look just a little to the left at those two buildings. the pretty blue one is sky condos and there are only TWO lights on in the whole place, the ugly brown one is hilton timeshare...WAY more lights on in that one.

just shows how many of those high rise condos are empty.
By doubledown_deadender

3/4/09 at 3:13 p.m.

Suggest removal

it's visitor volume, folks. nothing more, nothing less. we're now at around 15% year over year decrease in people flying in and that little difference is just enough to wreck the balance sheet of these places.>>>

I think you could add another 15% if you factor non-flyers, locals, Cali-AZ weekenders.

30% ? just a guess.
By pukiee

3/4/09 at 3:48 p.m.

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<<I think you could add another 15% if you factor non-flyers, locals, Cali-AZ weekenders.

30% ? just a guess.>>

Not a math whiz are you - If 15% aren't flying in and 15% aren't driving in, visitation is still down 15% - not 30%.

Say 1 million fly in and 15% aren't now (150,000 people). Also 1 million drive in and 15% aren't now (150,000 people). That's 300,000 out of 2 million -- duh! 15%.

If the amount who fly isn't the same as the amount who drive in, the weighted average would be taken but that goes beyond the scope of this post.
By doubledown_deadender

3/5/09 at 6:25 a.m.

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Puki you must a meth head on a 4 day binge? No one said visitor volume was down 15% ! You GED needin biatch! (key word) FLYER's down 15% i.e. McCarran traffic is down 15% y/y
Now, let's go one more step if you can just hold on...look at hotel/casino vacancy rate is down 30% if you subtract the 15% from flyers".you get another 15%...where do these people come from? Cali Arizona and Henderson you pipe hittin dipshiaat/
15 + 15 = 30
100% - 15 % = 85% with me so far? OK! Then...
85% - 15% = 70 % (still with me?)
100% - 70%?
Next".
By vegasdicepit

3/5/09 at 8:38 a.m.

Suggest removal

A casino is a license to steal and perfectly legal. So how is it these casino's during their hayday did not buy their debt down when money was flooding there properties. Where did the money go? How is it that some properties are not paid off? Circus Circus corp which became Mandalay Bay resorts paid cash to build Monte Carlo, Excalibur, Luxor and only financed a small portion of Mandalay Bay itself. How is it MGM Harrah's and Station's faulter when infact there nothing but cash cows? Someone explain, where is the money?
By pukiee

3/5/09 at 9:18 a.m.

Suggest removal

Double-
If there are equal amounts that fly in vs drive in, to make your math work there must be 45% not driving in.

Using my example above
1 million fly 15% aren't (150,000) 1 million drive 45% aren't (450,000) that's 600,000 out of 2 million....30% Understand lame?

I don't spend all day looking into visitor rates but from a math perspective YOU CANNOT ADD PERCENTAGES FROM DIFFERENT POPULATIONS. if visitation is down 30% that means 30% aren't flying or driving not 15% each.

P.S. Don't look now but I have my M.S. in structural engineering so your education comment is laughable. Guess we need to raise taxes to improve valley education... it sure failed you.
By doubledown_deadender

3/5/09 at 10:43 a.m.

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Puki

Hence -your structural failure once again.
No one said total visitors down 15%...the key word McCarran traffic down 15%.
Now, go check that rebar you installed at City Center MGM"I simply have no time for www/dot/papermill/engineer/com Jr college wanabees.