Vegas and Colorado Casino Operator Files for Bankruptcy
The latest casino to search for answers in this economic recession is Riviera Holdings Corp., operating casinos in Las Vegas and Colorado, which has filed for Chapter 11bankruptcy protection.
Riviera’s holdings include the Riviera Black Hawk Casino in Colorado and the Riviera Hotel and Casino on the Las Vegas Strip.
The Riviera Black Hawk Casino is located in the Denver area, with an array of classic casino gambling options.
The Riviera Las Vegas is on the north side of the Las Vegas strip, with the wider array of Vegas-style accommodations, from hotel and casino, to dining and nightly entertainment like burlesque shows, comedy and hypnotists.
The last few years have been very unkind to casino operators. Many casinos have decided to file bankruptcy, and new projects are in bankruptcy and sold long before they ever open their doors.
The chapter bankruptcy petition for Riviera includes a reorganization plan that will give stock, debt and a good deal of control to Connecticut-based group, Starwood Capital Group.
Starwood is perhaps best known for their work operating some high profile hotel chains, including Sheraton, W Hotels, Westin and Le Meridien.
The reorganization plan is the result of negotiations between the holders of $275 million in Riviera’s secured debt. Among that debt there is a $225 million term loan and interest owed, according to an article from the News Times.
The head of Starwood Capital, Barry Sternlicht, had already announced in March that a group that included Starwood had bought controlled of that secured debt for a steep discount, which the News Times referred to as “50 cents on the dollar.”
Sternlicht said that his group could have gotten a similar discount for one of the resorts owned by Riviera. He told the media that he could have gotten “about $5,000 a room, which is less than the cost of the furniture. I’m thinking of it as a long-term parking lot. We’re just going to hold it and have very little invested in the deal.”
With the recent Riviera bankruptcy filing, the News Times confirmed with a spokesperson for Starwood Capital that the group would still be “taking a lead role in the Riviera bankruptcy.”
The disclosure statement that was released alongside the bankruptcy protection plan does not make any predictions about how much secured lenders will get back. Unsecured creditors—those holding debt that isn’t attached to collateral—are expected to get back all that they are owed, as long as the total amount of debt from all of the creditors doesn’t go over $3 million.
The company listed has assets and liabilities in the $100 to $500 million range. Rivera revenue hit the skids in 2009 with net losses of $24.9 million, and in the first quarter of 2010 showed $4.5 million net losses. They revealed this information in the Chapter 11 bankruptcy filing. The bankruptcy petition was filed in U.S. Bankruptcy Court in Las Vegas.
In the reorganization plan, secured lenders will get a $50 million term loan and 80 percent of stock in the company.
Rivera general counsel, Tullio Marchionne, spoke about having a plan in place with the bankruptcy filing. “By agreeing with our secured lenders in advance, we will be able to proceed with an expeditious restructuring through bankruptcy which will provide us with a viable capital structure, as well as additional financing.”
Lenders who are willing to provide a new money loan of $20 million will get 8 percent of the company’s new stock and warrants for another ten percent of stock.