Hooters to skip interest payment, says bankruptcy possible

By Amanda Finnegan

Tuesday, March 31, 2009 | 4:35 p.m.

Hooters hotel-casino operator 155 East Tropicana LLC announced Tuesday it won’t make an interest payment on its senior secured notes, an action that could lead the casino operator to file for Chapter 11 bankruptcy.

“Based on our anticipated future operations, we do not believe that cash on hand and expected cash flows will be adequate to meet our anticipated operational expenses, debt service on equipment leases and Credit Facility, capital expenses, and scheduled payments of interest on our notes. As a result, we will be unable to make the interest payment on the notes due April 1, 2009,” the company said in a 10-K filing with the Securities and Exchange Commission today.

The company said it will continue normal operations under the direction of existing management and will continue to pay employees and honor benefits without interruptions. The company employs 874 people at its hotel-casino in Las Vegas.

155 East Tropicana had debt of $144.8 million as of March 3 after it borrowed an additional $3.4 million in the first quarter of the year, the company reported in the regulatory filing. The company has fully extended its credit facility and has no other sources of borrowing available “except for certain equipment financing as allowed under our notes and credit facility.”

After the nonpayment on Wednesday, note holders could claim default following a 30-day grace period. The company said it expects to enter into discussions with note holders and lenders to negotiate forbearance agreements and has hired Jefferies & Company as a financial advisor. If negotiations aren’t successful, note holders and lenders could accelerate repayments of all outstanding amounts, forcing 155 East Tropicana to file for bankruptcy.

“We cannot assure you that we would be successful in completing a refinancing or restructuring, if necessary,” the company said of future payments.

155 East Tropicana has about $8 million in cash for operations.

The company reported an operating loss of $5.6 million for the year compared to a loss of $1 million in 2007. Net operating revenues for the year were $60.1 million compared to $66.5 million in 2007.