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CR79-p16-northamerica1:SJC-Casino Review 19/4/09 00:11 Page 1
Riv chooses liquidity over interest payment
The Riviera, one of Las Vegas’ oldest casinos, has said it may
be forced to file for Chapter 11 having defaulted on its
interest payments. The venue, which opened in 1955 as the
ninth resort on the Las Vegas Strip, didn’t make a US$4m
quarterly interest payment. CEO William Westerman said
Riviera opted out of the interest payment so it could
maintain liquidity, blaming ‘devastating competitive
pressure on room rates’ and falling convention
attendance in Las Vegas. “Our immediate
priority is to address our untenable capital
structure with our lenders and Wachovia with the
goal of achieving a solution that either avoids the
necessity for Chapter 11 proceedings or that
results in a pre-negotiated plan of reorganization
which would be confirmed through voluntary
Chapter 11 proceedings,” Westerman said.
Hiring Morgan Stanley
should kick start sale
unable to
honour debt
time at MGM payments
MGM Mirage is
Its casino boasts 93 table games, lackofinterest
2,100 slot machines, 230 video UNITED STATES
poker games and a 16-table
cutting off two of its poker room. The resort also Hooters hotel-casino opera-
most reliable sources
offers a luxurious high-roller tor 155 East Tropicana LLC
of income to steady
salon functioning as a ‘casino could be on its way to
within a casino’ that includes 10 Chapter 11 following its con-
the ship as it nears
blackjack tables and an inter- firmation that it won’t be
the stormy waters of
changeable table for roulette or able to make an interest
baccarat; a high-limit slot room payment on its senior
loan covenants.
with 100 slot machines. secured notes.
Analysts estimate that the It has said that it will con-
settingsale sale of the two properties could tinue operating as normal
UNITED STATES generate up to $2bn which and will be able to pay its
would provide huge financial 874 strong workforce.
The carve up of US operating relief as the company nears a It stated in a 10-K filing
giant MGM Mirage could soon be May 15 deadline to pay off the with the Securities and
underway with the group enlist- interest taken on from loans. Exchange Commission,
ing the services of Morgan Stanley Morgan Stanley is reportedly however: “Based on our
to oversee the potential off already in negotiations with anticipated future opera-
loading of two of its most reliable potential purchasers and is tions, we do not believe that
revenue streams, MGM Grand analysing which groups are cash on hand and expected open discussion with note
Detroit and the Beau Rivage good for cash or credit as well as cash flows will be adequate holders and lenders to
casino in Biloxi, Mississippi. whether State regulators would to meet our anticipated negotiate a solution, which
Having already sold its Treas- allow the deal to go through. operational expenses, debt could force the operator to
ure Island casino in Las Vegas to Some analysts have likened service on equipment leases file for bankruptcy.
investor Phil Ruffin for the process to a private auction and credit facility, capital “We cannot assure you
US$775m, the group is now with companies qualifying for expenses and scheduled that we would be successful
keen to sell more of its portfolio the criteria above being asked payments of interest on our in completing a refinancing
to raise cash to ease the pres- the casino sector. In stark con- The opening night in October to make ceiled bids. The proper- notes. As a result, we will be or restructuring, if neces-
sure on a series of pending inter- trast to double digit declines in
2007 of the MGM Grand in
ties are not expected to be sold unable to make the interest sary,” the company said of
est payments as well as to secure Las Vegas, casinos in Detroit in
Detroit, now one of two US
at underrated prices though. payment on the notes due future payments.
the future of its $8.6bn City- February saw an increase in
properties reportedly up for sale.
MGM Mirage is also believed April 1, 2009.” The 30,000-square-foot
Centre project in Las Vegas. GGR of four per cent. to be in discussion with private- Having reached its credit Hooters-themed casino
MGM Mirage chief executive However, whilst offloading recent years, spending $800m equity firm Colony Capital LLC capacity the casino has no floor offers approximately
Jim Murren has already said in the properties would provide in 2007 to build the permanent to secure a loan of up to $750m options to borrow ‘except 710 state-of-the-art slot and
recent interviews that cashing a get rich quick injection of Detroit venue complete with its to help refinance its debt. for certain equipment video poker machines and
in on some properties would be cash, it would also leave some- 18 storey, 400 room hotel. It also MGM Mirage spokesman financing as allowed under 33 table games. Owner 155
‘part of the solution’ in restruc- thing of a financial chasm invested $500m to rebuild the Gordon Absher said: “We con- our notes and credit facility.’ East Tropicana has about
turing the company’s debt. Las depriving MGM of critical Beau Rivage following the tinue to work with our The operator had $8m in cash for operations.
Vegas media outlets highlighted cash flow in the future. damage caused by Hurricane lenders to find a solution to amassed debt of $144.8m It saw an operating loss of
that a source close to MGM said With over 90 tables and 4,000 Katrina in 2005.The 1,740 room our financial situation.” after it borrowed an addi- $5.6m during 2008 com-
that its properties in Detroit slots, the venue in Detroit casino hotel is the tallest and largest Another spokesman Alan tional $3.4m in the first pared to a loss of $1m a
and Biloxi have produced reli- saw Ebitda of $131m in 2008 building in Mississippi reaching Feldman added: “The company quarter of the year. year earlier. Net operating
able and consistent revenue whilst the Beau Rivage casino’s 32 storeys and features the most is going to explore all available It has hired Jefferies & revenues for the year were
streams in what has otherwise equated to $100m. MGM Mirage table games, guest rooms and options and will develop a com- Company as a financial $60.1m compared to
been a disappointing slump for has invested heavily in both in meeting space on the Gulf Coast. prehensive strategic plan.” advisor and is planning to $66.5m in 2007.
Pennsylvania hands out ‘under age’ fines
kidsofamerica Act forbids slot machine machines over an hour’s time defiant trespass summonses ees during peak hours, and needed to gain approval as a
UNITED STATES gambling by individuals under before being asked for identi- to the underage offenders. the casino publicly pledged Certified Vendor. The
the age of 21. fication. At today’s meeting, its support to meet the company supplies and leases
The Pennsylvania Gaming The civil penalty was On November 1, 2008, an Philadelphia Park acknowl- Gaming Act’s goals of pro- the structure that houses the
Control Board has fined assessed by the board at its 18 year old male walked past edged to the Board that it has hibiting underage gaming in temporary slots facility for
Greenwood Gaming and public hearing in Harrisburg two security guards without taken appropriate actions to Pennsylvania. The Meadows Racetrack and
Entertainment, operators of and stemmed from violations being asked for identification, discipline employees, and in In a separate action, the Casino in Washington
Philadelphia Park Casino and that occurred in 2008. played slot machines and one instance even terminated Board fined a Canadian firm, County.
Racetrack in Bensalem, On July 6, 2008, a 20 year cashed a voucher. Later, after an employee involved in Sprung Instant Structures, of In addition to the fine,
$24,000 for two separate old male walked past a secu- leaving the gaming floor and these incidents. The casino Calgary, $5,000 for failing to Sprung Instant Structures
instances of allowing under- rity guard and played a slot attempting to re-enter, identi- has also hired a new security comply with various requests agreed to reimburse the
age gambling to occur. The machine for at least eight fication was requested. director who has, among of the Bureau of Licensing Gaming Control Board
Pennsylvania Racehorse minutes, and was also seen The Pennsylvania State other things, increased the regarding the submission of $28,000 for the projected cost
Development and Gaming sitting at several other Police issued trespass or number of security employ- necessary information to complete its investigation.
16 May 2009 • northamericanews
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