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Riviera files for Chapter 11 bankruptcy reorganization

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Steve Marcus

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

Updated Monday, July 12, 2010 | 6:09 p.m.

Riviera Holdings Corp., owner of casinos in Las Vegas and Colorado, filed for Chapter 11 bankruptcy reorganization Monday -- the latest in a series of gaming industry bankruptcies during the current recession.

Also filing for reorganization in U.S. Bankruptcy Court in Las Vegas were subsidiaries Riviera Operating Corp. and Riviera Black Hawk Inc. These companies own the Riviera hotel-casino on the Las Vegas Strip and the Riviera Black Hawk in Colorado.

In court papers, attorneys for Riviera said its planned restructuring is supported by holders of more than two-thirds of its $247.7 million in debt under its June 2007 Senior Credit Facility.

A Riviera Las Vegas hotel-casino spokeswoman said the company had no immediate comment on the filing, and attorneys for the bankrupt company could not immediately be reached for comment.

But because this is a Chapter 11 filing backed by the key creditors, it's likely the Riviera Las Vegas and the Riviera Black Hawk will operate normally through the bankrupty process.

In court papers, the company said it also has liabilities under a securities hedging agreement of $27.9 million.

The value of the company has declined in the recession and its assets are worth less than its liabilities, Riviera said in its filing.

In describing Monday's filings, Riviera attorneys wrote: "Debtors were faced with declining hotel and casino revenues based on reduced consumer spending, a tightening credit market, and an overall weakening economy.

"Most of these market-driven challenges manifested after the debtors leveraged themselves with the Senior Credit Facility and the secured hedging agreement, thus leaving the debtors in a highly precarious position at a time when they most needed robust financial performance."

It wasn't immediately known if real estate investor Barry Sternlicht’s Starwood Capital Group LLC had participated in the restructuring.

Bloomberg News reported in March that Sternlicht, formerly a big player on the Las Vegas Strip, had said Starwood Capital and other investors had bought control of Riviera’s first mortgage for about 50 cents on the dollar and was leading creditors negotiating a pre-packaged bankruptcy.

On May 17, Riviera Holdings said it lost $4.5 million as revenue fell in the first quarter.

The loss, amounting to 36 cents per share, compared to a loss in the year-ago quarter of $1 million or 8 cents per share.

Net revenue of $30.8 million was down from $34.7 million in the year-ago quarter.

In the first quarter, revenue at the 2,075-room Riviera Las Vegas of $20.5 million was down from $24.4 million in the 2009 quarter. At the Riviera in Black Hawk, Colo., with 750 slot machines and a dozen gaming tables, revenue of $10.3 million was up from $10.2 million.

Amid tough competition on the Las Vegas Strip, Riviera said its room revenue there of $8.4 million tumbled 18.4 percent as the average daily room rate fell about 20 percent to $55.69. Room occupancy of 82.2 percent was up from 76.8 percent.

Monday's filing followed several other high-profile bankruptcies and debt defaults in the gaming industry including those of Tropicana Entertainment, Herbst Gaming, Fontainebleau Las Vegas, Station Casinos, Majestic Star Casino, Planet Hollywood Las Vegas, Hooters Las Vegas, the Greek Isles and Black Gaming.

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