LAS VEGAS, March 31 /PRNewswire-FirstCall/ -- Riviera Holdings
Corporation (NYSE Amex: RIV) today reported that the Company did
not pay the approximately $4 million interest due March 30, 2009
and also reported the financial results for the three- and
twelve-month periods ended December 31, 2008. Riviera's current
debt consists of a seven-year $225 million term loan which matures
on June 8, 2014 (the "Term Loan") and a $20 million five-year
revolving credit facility (the "Revolving Credit Facility" together
with the "Term Loan", the "New Credit Facility"). On February 26,
2009, the Company received a notice of default on its New Credit
Facility (see Note 10 to the Consolidated Financial Statements
contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 2008, filed with the Securities Exchange
Commission on March 31, 2009) from Wachovia Bank, National
Association ("Wachovia"), the administrative agent. The notice of
default (the "Notice") relates to our New Credit Facility and is
the result of the Company's failure to provide a Deposit Account
Control Agreement (a "DACA") from each of the Company's depository
banks per a request made by Wachovia to the Company on October 14,
2008. The DACA that Wachovia requested the Company to execute was
in a form that the Company ultimately determined to contain
unreasonable terms and conditions as it would enable Wachovia to
access all of the Company's operating cash and order it to be
transferred to a bank account specified by Wachovia. The Notice
further provides that as a result of the default, the Company will
no longer have the option to request LIBOR Rate loans. As a result
of losing the availability of LIBOR Rate loans under the New Credit
Facility, the interest rate on the Term Loan will increase from
approximately 7.5 percent to 8.5 percent and the interest rate for
the Revolving Credit Facility will remain the same. On March 25,
2009, we engaged XRoads Solution Group LLC as our financial
advisor. Based on an extensive analysis of our current and
projected liquidity, and with our financial advisor's input, we
determined it was in the best interests of the Company to not pay
the accrued interest of approximately $4 million on our $245
million New Credit Facility, which was due March 30, 2009.
Consequently, we elected not to make this interest payment. The
Company's failure to pay interest due on any loan within our New
Credit Facility within a three-day grace period from the due date
is an event of default under our New Credit Facility. We do not
plan to pay the interest due within the three-day grace period. As
a result of this event of default, the Company's lenders have the
right to seek to charge additional default interest in the amount
of 2 percent on the Company's outstanding principal and interest
under our credit agreement (the "Credit Agreement"), and
automatically charge additional default interest of 1 percent on
any overdue amounts under the interest rate swap agreement (the
"Swap Agreement") we entered in conjunction with our New Credit
Facility. These default rates are in addition to the interest rates
that would otherwise be applicable under the Credit Agreement and
Swap Agreement. We believe that the Company's lenders will seek to
apply these higher default interest rates as a result of the
Company's failure to make the interest payment due on March 30,
2009. We have entered into discussions with Wachovia to negotiate a
waiver or forbearance regarding the Notice and the anticipated
payment default and an anticipated going concern default (see
discussion below). If we are not successful in negotiating a waiver
or forbearance agreement with the Company's lenders regarding the
Notice and the anticipated payment and going concern defaults,
Wachovia and the lenders under the New Credit Facility would have
the ability to: i) accelerate repayment of all amounts outstanding
under the New Credit Facility ($227.5 million at December 31,
2008): ii) commence foreclosure on some or all of our assets
securing the outstanding balance under the New Credit Facility; or
iii) exercise other rights and remedies granted under the New
Credit Facility as may be available pursuant to applicable law. In
addition, under our interest rate swap agreement, Wachovia can
terminate the interest rate swap agreement and accelerate repayment
of the amount outstanding under that agreement ($30.2 million at
December 31, 2008). If the New Credit Facility and interest rate
swap indebtedness were to be accelerated, we would be required to
refinance or restructure the payments on that debt. We cannot
assure you that we would be successful in completing a refinancing
or consensual out-of-court restructuring, if necessary. If we were
unable to do so, we would likely be compelled to seek protection
under Chapter 11 of the U. S. Bankruptcy Code. Our independent
registered public accounting firm has included an explanatory
paragraph that expresses substantial doubt as to our ability to
continue as a going concern in their audit report contained in our
Annual Report on Form 10-K for the year ended December 31, 2008
filed with the Securities Exchange Commissions earlier today.
William L. Westerman, Chairman and CEO of Riviera Holdings
Corporation, said, "The decision not to pay our accrued interest
was both difficult and unpleasant. We have always prided ourselves
on paying all our obligations on a timely basis. However, in view
of the continuing devastating competitive pressure on room rates,
the rapidly depreciating convention attendance in the Las Vegas
market, and the input of our financial advisor, we determined it
was imperative and in the best interests of our Company to maximize
our liquidity by retaining the funds that would have been employed
to pay the first quarter interest. "Both our Las Vegas and Black
Hawk properties are generating positive free cash flow and this,
combined with our cash balances, will help insure that we continue
to pay all our operating costs on a timely basis and fund
maintenance capital expenditures. There will be no effect on our
team members, vendors and most importantly, our customers. Our
lenders and the Company are well aware of the necessity of
resolving this situation in an expeditious manner to preserve the
long term viability and value of the Company. 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. "The
deteriorating trends in revenue and earnings experienced during the
first three quarters of 2008 continued as evidenced by our fourth
quarter results and accelerated during the first quarter of 2009.
We expect this situation to continue as long as competitors in the
Las Vegas market follow a strategy of sacrificing ADR to maximize
room occupancy and the decline in convention business is unabated.
In spite of this pessimistic outlook, we are confident that we will
maintain sufficient cash flow to meet our operating obligations and
maintain our properties. We expect to emerge through a
restructuring with a capital structure which will enable the
Company not only to survive, but to grow as the economy recovers
and the competitive situation in Las Vegas returns to a more
rational environment." Fourth Quarter 2008 Net revenues for the
fourth quarter of 2008 were $36.0 million, a decrease of $11.4
million, or 24 percent, from $47.4 million for the comparable
period in the prior year. Net revenues decreased due to a 23
percent net revenue reduction at Riviera Las Vegas and a 27 percent
net revenue reduction at Riviera Black Hawk. Operating loss was
$0.7 million compared to operating income of $4.7 million for the
three months ended December 31, 2008 and 2007, respectively. The
decrease was due primarily to a 115 percent decline in operating
results at Riviera Las Vegas and a 53 percent decline in operating
results at Riviera Black Hawk. Fourth quarter of 2008 operating
results included $1.0 million in corporate payroll and related
expenses, $0.2 million in equity compensation costs and $0.1
million in mergers, acquisitions and development costs. These
corporate costs and expenses were $0.7 million less than the same
quarter the prior year. Adjusted EBITDA(1) for the fourth quarter
of 2008 was $3.6 million, a decrease of $4.9 million, or 58
percent, from $8.5 million for the comparable period in the prior
year. Adjusted EBITDA(1) consists of earnings before interest,
income taxes, depreciation, amortization, equitybased compensation,
asset impairment costs, the effects of the accounting for our
interest rate swap agreement and mergers, acquisitions and
development costs, net, as described within footnote #1 to the
financial summary table below. Adjusted EBITDA(1) was 10 percent
and 18 percent of net revenues for the three months ended December
31, 2008 and 2007, respectively. The decrease in Adjusted EBITDA(1)
was due to a 64 percent reduction in Adjusted EBITDA at Riviera Las
Vegas and a 42 percent reduction in Adjusted EBITDA at Riviera
Black Hawk. Riviera Las Vegas and Riviera Black Hawk operating
results are described below. Net loss for the fourth quarter of
2008 was $12.7 million, or $1.02 per share on a fully diluted
basis, a decline of $6.6 million, compared to a net loss of $6.1
million, or $0.50 per share on a fully diluted basis, for the same
period in the prior year. Net losses included $5.2 million and $6.6
million in unrealized losses on derivatives for the fourth quarters
ended December 31, 2008 and 2007, respectively. The unrealized
losses on derivatives had no effect on cash or cash equivalents and
are the result of changes in the valuation of the interest rate
swap derivative. Additionally, net loss for the three months ended
December 31, 2008 included a $2.4 million write-down of our
deferred tax asset. Currently, we do not believe that it is more
likely than not that we can utilize the deferred tax assets.
Therefore, a valuation allowance has been provided for our net
deferred tax assets. Twelve Months Ended December 31, 2008 Net
revenues for the twelve months ended December 31, 2008 were $169.8
million, a decrease of $35.7 million, or 17 percent, from $205.5
million for the comparable period in the prior year. Net revenues
decreased due to a 16 percent net revenue reduction at Riviera Las
Vegas and a 23 percent net revenue reduction at Riviera Black Hawk.
Income from operations for the twelve months ended December 31,
2008 was $11.2 million, a decrease of $18.6 million, or 62 percent,
from $29.8 million for the comparable period in the prior year.
Income from operations decreased as a result of a 60 percent
operating income reduction at Riviera Las Vegas and a 47 percent
operating income reduction at Rivera Black Hawk. Included in income
from operations for the twelve-month period of 2008 was $3.9
million in corporate payroll and related expenses, $0.8 million in
equitybased compensation costs and $0.2 million in mergers,
acquisitions and development costs. These corporate costs and
expenses were $1.5 million less than the same period the prior
year. Adjusted EBITDA(1) was $27.1 million, a decrease of $17.5
million, or 39 percent, from $44.6 million for the comparable
period in the prior year. Adjusted EBITDA(1) was 16 percent and 22
percent of net revenues for the twelve months ended December 31,
2008 and 2007, respectively. Riviera Las Vegas and Riviera Black
Hawk operating results are described below. Net losses were $11.9
million, or $0.96 per share on a fully diluted basis, for the
twelve months ended December 31, 2008 compared with $18.3 million,
or $1.48 per share on a fully diluted basis, for the same period in
2007. Net losses included a $2.4 million write-down of our deferred
tax asset and a $12.9 million loss on the retirement of the 11
percent Notes for the twelve months ended December 31, 2008 and
2007, respectively. Additionally, net losses included a $3.6
million and $13.3 million in unrealized losses on derivatives for
the twelve months ended December 31, 2008 and 2007, respectively.
The unrealized gains and losses on derivatives have no effect on
cash or cash equivalents and are the result of changes in the
valuation of the interest rate swap derivative. Finally, net losses
included $17.1 million and $21.9 million in interest expense, net
of interest income, for the twelve months ended December 31, 2008
and 2007, respectively. The decrease in interest expense, net of
interest income, was due primarily to more favorable interest rate
terms associated with our New Credit Facility which was executed in
June 2007. Liquidity and Capital Resources Riviera had cash and
cash equivalents of $13.5 million as of December 31, 2008 and $20.5
million as of September 30, 2008. In addition, Riviera had $2.8
million in restricted cash and investments as of December 31, 2008.
The Company's cash and cash equivalents decreased by $7.0 million
during the three months ended December 31, 2008 primarily as a
result of a $5.4 million decrease in income from operations and
$4.1 million in net cash used in investing activities. As of
December 31, 2008, Riviera was in compliance with the financial
covenant set forth in the Credit Agreement. The Consolidated
Leverage Ratio (as defined in the Credit Agreement) was 8.4 for the
four quarters ending December 31, 2008. The maximum allowable
Consolidated Leverage Ratio permitted under the Credit Agreement as
of December 31, 2008 is 6.5. However, the Consolidated Leverage
Ratio test is applicable only if Riviera has more than $2.5 million
outstanding on the Revolving Credit Facility. As of December 31,
2008, Riviera had $2.5 million outstanding on the Revolving Credit
Facility. Forward -Looking Statements In accordance with the "Safe
Harbor" provisions (as that term is defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended) of the Private
Securities Litigation Reform Act of 1995, we provide the following
cautionary remarks regarding important factors which, among others,
could cause future results to differ materially from the
forward-looking statements, expectations and assumptions expressed
or implied in this news release. Forward-looking statements include
the words "may," "aim," "foresee," "potential," "should," "would,"
"could," "likely," "estimate," "intend," "plan," "continue,"
"believe," "expect," "projections" or "anticipate," and similar
words, and they include all discussions about our ongoing or future
plans, objectives or expectations. Risks and uncertainties that
could cause actual results to differ materially from the results
anticipated in the forward-looking statements include, among other
factors: uncertain hotel and casino market conditions, financing
requirements, interest rates, proposals for the acquisition of
Riviera, increases in energy costs, economic and political
instability, disruptions affecting expansion and modernization
objectives and timetables, onerous regulatory requirements,
fiscally burdensome planned or unplanned Capital Expenditures and
other risks and uncertainties detailed from time to time in our
filings with the Securities and Exchange Commission.
Forward-looking statements involve significant known and unknown
risks, uncertainties and other factors that may cause our actual
results, performance or achievements to differ materially from
anticipated results, performance or achievements expressed or
implied by the forward-looking statements. We do not intend to
update its forward-looking statements even though our situation or
plans may change in the future, unless applicable law requires us
to do so. About Riviera Holdings Corporation Riviera Holdings
Corporation owns and operates the Riviera Hotel and Casino on the
Las Vegas Strip and the Riviera Black Hawk Casino in Black Hawk,
Colorado. Riviera Holdings Corporation's stock is listed on the
NYSE Amex, under the symbol RIV. - Tables Follow - Riviera Holdings
Corporation Financial Summary (Amounts in thousands except per
share amounts) Three Months Ended December 31,
-------------------------------- 2008 2007 Var %Var ---- ---- ---
---- Net Revenues: Riviera Las Vegas $26,825 $34,908 $(8,083)
-23.2% Riviera Black Hawk 9,150 12,515 (3,365) -26.9% Total Net
Revenues 35,975 47,423 (11,448) -24.1% Income From Operations:
Riviera Las Vegas (648) 4,253 (4,901) -115.2% Riviera Black Hawk
1,159 2,449 (1,290) -52.7% Mergers, acquisitions and development
costs, net (87) (163) 76 46.6% Equity-based compensation (175)
(207) 32 15.5% Asset impairment 0 (72) 72 100.0% Corporate expenses
(957) (1,535) 578 37.7% Total Income From Operations: (708) 4,725
(5,433) -115.0% Adjusted EBITDA (1): Riviera Las Vegas 2,197 6,023
(3,826) -63.5% Riviera Black Hawk 2,318 4,001 (1,683) -42.1%
Corporate Expenses (957) (1,535) 578 37.7% Total Adjusted EBITDA
3,558 8,489 (4,931) -58.1% Adjusted EBITDA Margins (2): Riviera Las
Vegas 8.2% 17.3% -9.1% Riviera Black Hawk 25.3% 32.0% -6.7%
Consolidated 9.9% 17.9% -8.0% Net income (loss) before tax
provision $(10,242) $(6,140) $(4,102) Income tax provision (2,446)
0 (2,446) Net (loss) $(12,688) $(6,140) $(6,548) EARNINGS PER SHARE
DATA: Weighted average basic shares outstanding 12,412 12,326 86
Basic earnings (loss) per share $(1.02) $(0.50) $(0.33) Weighted
average diluted shares outstanding 12,412 12,326 86 Diluted
earnings (loss) per share $(1.02) $(0.50) $(0.33) Twelve Months
Ended December 31, -------------------------------- 2008 2007 Var
%Var ---- ---- --- ---- Net Revenues: Riviera Las Vegas $128,031
$151,505 $(23,474) -15.5% Riviera Black Hawk 41,729 53,990 (12,261)
-22.7% Total Net Revenues 169,760 205,495 (35,735) -17.4% Income
From Operations: Riviera Las Vegas 9,335 23,530 (14,195) -60.3%
Riviera Black Hawk 6,739 12,653 (5,914) -46.7% Mergers,
acquisitions and development costs, net (191) (611) 420 68.7%
Equity-based compensation (795) (966) 171 17.7% Asset impairment 0
(72) 72 100.0% Corporate expenses (3,857) (4,745) 888 18.7% Total
Income From Operations: 11,231 29,789 (18,558) -62.3% Adjusted
EBITDA (1): Riviera Las Vegas 18,748 30,166 (11,418) -37.9% Riviera
Black Hawk 12,209 19,133 (6,924) -36.2% Corporate Expenses (3,857)
(4,745) 888 18.7% Total Adjusted EBITDA 27,100 44,554 (17,454)
-39.2% Adjusted EBITDA Margins (2): Riviera Las Vegas 14.6% 19.9%
-5.3% Riviera Black Hawk 29.3% 35.4% -6.1% Consolidated 16.0% 21.7%
-5.7% Net income (loss) before tax provision $(9,416) $(18,258)
$8,842 Income tax provision (2,446) 0 (2,446) Net (loss) $(11,862)
$(18,258) $6,396 EARNINGS PER SHARE DATA: Weighted average basic
shares outstanding 12,393 12,309 84 Basic earnings (loss) per share
$(0.96) $(1.48) $0.72 Weighted average diluted shares outstanding
12,393 12,309 84 Diluted earnings (loss) per share $(0.96) $(1.48)
$0.72 (1) Adjusted EBITDA consists of earnings before interest,
income taxes, depreciation, amortization, equity-based
compensation, asset impairment loss on extinguishments of debt, the
effects of the accounting for our interest rate swap agreement, and
mergers, acquisitions and development costs, net, as shown in the
reconciliation with net income in the tables below in this release.
Adjusted EBITDA is presented solely as a supplemental disclosure
because we believe that it is 1) a widely used measure of operating
performance in the gaming industry, and 2) a principal basis for
valuation of gaming companies by certain investors. We use
property- level EBITDA (earnings before interest, income taxes,
depreciation, amortization and corporate expense) as the primary
measure of our business segment properties' performance, including
the evaluation of our operating personnel. Adjusted EBITDA should
not be construed as an alternative to operating income, as an
indicator of our operating performance, as an alternative to cash
flows from operating activities, as a measure of liquidity, or as
any other measure determined in accordance with generally accepted
accounting principles. We have significant uses of cash flows,
including capital expenditures, interest payments and debt
principal repayments, which are not reflected in Adjusted EBITDA.
Also, other gaming companies that report EBITDA or Adjusted EBITDA
may calculate it in a different manner than we do. A reconciliation
of net income (loss) to Adjusted EBITDA is included in the tables
below in this release. (2) Adjusted EBITDA Margins represent
Adjusted EBITDA divided by Net Revenues. Riviera Holdings
Corporation and Subsidiaries Reconciliation of Net Income to
Adjusted EBITDA (Amounts in thousands) Net Income Other Operating
Income Tax Income Income (Loss) Provision (Expense)* (Loss)
Depreciation ------ --------- ---------- ------ ------------ Fourth
Quarter 2008: Riviera Las Vegas $(637) $- $11 $(648) $2,943 Riviera
Black Hawk (156) - (1,315) 1,159 1,061 Corporate (11,895) (2,446)
(8,230) (1,219) - ------- ------ ------ ------ --- $(12,688)
(2,446) $(9,534) $(708) $4,004 Fourth Quarter 2007: Riviera Las
Vegas $4,293 $- $40 $4,253 $2,271 Riviera Black Hawk 1,092 -
(1,357) 2,449 1,051 Corporate (11,525) - (9,548) (1,977) - -------
--- ------ ------ --- $(6,140) $0 $(10,865) $4,725 $3,322 Twelve
Months Ended December 31, 2008: Riviera Las Vegas $9,383 $- $48
$9,335 $10,599 Riviera Black Hawk 1,488 - (5,251) 6,739 4,284
Corporate (22,733) (2,446) (15,444) (4,843) - ------- ------
------- ------ --- $(11,862) $(2,446) $(20,647) $11,231 $14,883
Twelve Months Ended December 31, 2007: Riviera Las Vegas $23,715 $-
$185 $23,530 $9,143 Riviera Black Hawk 5,785 - (6,868) 12,653 3,973
Corporate (47,758) - (41,364) (6,394) - ------- --- ------- ------
--- $(18,258) $- $(48,047) $29,789 $13,116 Balance Sheet Summary
Dec 31, Dec 31, 2008 2007 Cash and short term investments $16,233
$31,591 Total current assets 22,384 40,211 Property and equipment,
net 179,918 172,865 Total assets $204,960 $218,462 Long-term debt,
net of current portion 158 225,288 Total current liabilities
$263,595 $26,665 Total stockholders' deficiency $(58,793) $(47,826)
Mergers Equity Acquisitions, Asset Based Development Management
Adjusted Impairment Comp & Costs Fee EBITDA ---------- ----
------- --- ------ Fourth Quarter 2008: Riviera Las Vegas $- $- $-
$(98) $2,197 Riviera Black Hawk - - - 98 2,318 Corporate - 175 87 -
(957) --- --- -- --- ---- $- $175 $87 $- $3,558 Fourth Quarter
2007: Riviera Las Vegas $- $- $- $(501) $6,023 Riviera Black Hawk -
- - 501 4,001 Corporate 72 207 163 - (1,535) -- --- --- --- ------
$72 $207 $163 $- $8,489 Twelve Months Ended December 31, 2008:
Riviera Las Vegas $- $- $- $(1,186) $18,748 Riviera Black Hawk - -
- 1,186 12,209 Corporate - 795 191 - (3,857) --- --- --- --- ------
$- $795 $191 $- $27,100 Twelve Months Ended December 31, 2007:
Riviera Las Vegas $- $- $- $(2,507) $30,166 Riviera Black Hawk - -
- 2,507 19,133 Corporate 72 966 611 - (4,745) -- --- --- --- ------
$72 $966 $611 $- $44,554 * See pages 3 and 4 RIVIERA HOLDINGS
CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (Amounts in thousands, Three Months Ended Twelve Months
Ended except per share amounts) December 31 December 31 2008 2007
2008 2007 Revenues: Casino $20,199 $26,399 $91,261 $114,340 Rooms
10,847 13,614 52,408 59,890 Food and beverage 5,946 7,416 28,433
32,353 Entertainment 3,242 3,539 13,424 13,498 Other 1,679 1,591
6,815 6,632 Total Revenues 41,913 52,559 192,341 226,713
Less-promotional allowances (5,938) (5,136) (22,581) (21,218) Net
revenues $35,975 $47,423 $169,760 $205,495 COSTS AND EXPENSES:
Direct costs and expenses of operating departments: Casino 11,419
13,737 47,752 56,197 Rooms 5,773 6,502 25,418 28,121 Food and
beverage 4,157 5,240 20,506 23,848 Entertainment 1,665 2,334 8,049
8,687 Other 270 317 1,241 1,360 Other operating expenses: General
and administrative 9,133 10,804 39,694 42,728 Mergers, acquisitions
and development costs 87 163 191 611 Share-based compensation 175
207 795 966 Asset impairment - 72 - 72 Depreciation and
amortization 4,004 3,322 14,883 13,116 Total costs and expenses
36,683 42,698 158,529 175,706 INCOME (LOSS) FROM OPERATIONS (708)
4,725 11,231 29,789 OTHER EXPENSE: Interest expense, net (4,361)
(4,237) (17,091) (21,897) Loss on retirement of bonds - - -
(12,878) Decrease in value or derivatives (5,173) (6,628) (3,556)
(13,272) Total other expense (9,534) (10,865) (20,647) (48,047)
Income tax provision (2,446) 0 (2,446) 0 NET LOSS: $(12,688)
$(6,140) $(11,862) $(18,258) LOSS PER SHARE DATA: Shares used in
calculating net income (loss) per common share: Basic 12,412 12,326
12,393 12,309 Diluted 12,412 12,326 12,393 12,309 Net loss per
common share: Basic $(1.02) $(0.50) $(0.96) $(1.48) Diluted $(1.02)
$(0.50) $(0.96) $(1.48) DATASOURCE: Riviera Holdings Corporation
CONTACT: Phil Simons, Treasurer and CFO of Riviera Holdings
Corporation, +1-702-794-9527, fax, +1-702-794-9442, ; or Investor
Relations, Betsy Truax of Skorpus Consulting, +1-208-241-3704, fax,
+1-208-232-5317, , for Riviera Holdings Corporation
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