Once again, Las Vegas is being hit hard by the crushing economy. The third large gaming company in the last 12 months will be forced to file bankruptcy. The Riviera Holdings Corporation is set to file for bankruptcy in the upcoming week.
Last Monday it was reported that the Riviera did not complete a $4 milllion interest payment that was due. This has been a common theme as of late in the casino market. Although the company has a grace period of 3 days in order to complete the payment, the casino operator has revealed that they have no intentions of making the payment.
The $245 million dollar credit is through Wachovia Bank, and without intent to pay, the bank will be forced to default the Riviera. The Chief Executive Officer, William Westerman stated that they decided not to make the payment in order to maintain more liquidity. Many casinos have gone this route in order to try to keep their business going as long as they can, all the while fighting the banks about their debt.
Westerman claims that the lack of company revenues is due to competitive room rates, and falling numbers in convention attendance in Las Vegas. Even with the current situation, Westerman maintains that he “is confident that we will maintain sufficient cash flow to meet our operating obligations and maintain our properties.”
The Riviera is located on the actual Las Vegas Strip, and employs 1,137 workers in the casino. Last year they suffered revenue drop in hotel rooms by 12.5 percent. This was due to occupancy dropping 9.2 points from the previous year to 83.8 percent. The Riviera will continue to struggle for some time, as the fourth quarter statements show a net loss of $12.7 million which equates to $1.02 a share.
Mike Sullivan, a finance professor has stated that Wachovia has the ability to dictate to the Riviera what is in their best interest. “Wachovia is probably deciding what they want to do and how to structure things,” he said. “Are they better off going through a formal Chapter 11, or are they better off restructuring the debt at this point?” said Sullivan.
