Riviera Holdings Posts Second Quarter Loss and Warns About Future

Riviera Holdings, parent company of the Riviera on the Las Vegas Strip, recently filed its Second Quarter 2013 results with the U.S. Securities and Exchange Commission (SEC). The numbers show that the property continues to struggle as the north end of the Las Vegas Strip remains partially undeveloped after the real estate bust and subsequent recession.  The company also warned that it was in default with two of its creditors.

Riviera Holdings in Default

Riviera Holdings disclosed in its August 14, 2013 10-Q filing that the company was in default under its Series A and Series B Credit Agreements.  Similar statements were made about both:

Beginning on August 1, 2012 and continuing through the date of this report, the Company has been in default under the Series A Credit Agreement. The lenders and administrative agent under the Series A Credit Agreement have not taken any action to exercise any remedies under the Series A Credit Agreement.

Beginning on August 1, 2012 and continuing through the date of this report, the Company has been in default under the Series B Credit Agreement; the lenders and administrative agent under the Series B Credit Agreement have not taken any action to exercise any remedies under the Series B Credit Agreement.

The Series A and Series B lenders own 100% of the company’s Class B Non-Voting Common Stock.

Going Concern Warning

Riviera Holdings noted that its accounting firm “expresses doubt as to our ability to continue as a going concern” in an audit included in its annual filing for the 2012 fiscal year. This was reported on a 10-K filed with the SEC on April 1, 2013.

The company addresses the possibility that Series A and Series B Credit Agreement holders may exercise their options under the terms of default later in the 10-Q filing for 2Q 2013:

In the event that we were to repay all such amounts owed, we would not have sufficient capital resources to cover our operating losses and would need to obtain additional capital, including additional equity financing, debt financing or capital contributions from stockholders, if available to us. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. Failure to secure any necessary additional financing would have a material adverse affect on our operations and ability to continue as a going concern.

Financial Results

According to Riviera Holding’s 2Q 2013 10-Q filing with the SEC, Second Quarter 2013 revenue was down in every category against the 2012 numbers.  The casino floor won $6.63 million in 2Q 2013, down 30.8% from 2Q 2012.  Hotel (-21.9%), food and beverage (-24.5%), entertainment (-10%) and other revenue (-17%) were all negative in terms of  revenue against 2012.  Total revenue after promotional allowances for 2Q 2013 came in at $15.71 million.  That was down 25.2% from the $21.01 million the company generated in 2Q 2012.

Year-to-date revenue was also negative across the board.  Riviera’s casino floor won $12.93 million in the first half of 2013, down 29.7% from its casino win of $18.4 million in the first half of 2012.  Year-to-date numbers in other categories were also negative against the first half of 2012.  This includes hotel (-23.3%), food and beverage (-32.9%), entertainment (-47.5%), and other revenue (-6.9%), according to the company’s SEC filings.

Year-to-date 2013 total revenue after promotional expenses was $30.6 million, down 26.9% from the $41.87 million posted in the first half of 2012.

The company posted a 2Q 2013 net loss of $7.38 million.  The 2013 year-to-date net loss as of June 30, 2013 was $14.93 million.

According to the latest SEC filing, long-term debt was $79.64 million.

Hotel Occupancy

Hotel occupancy in the 2075-room resort fell from 81.3% in 2Q 2012 to 55.3% in 2Q 2013.  The number of rooms vacant on average jumped from 388 in 2Q 2012 to 927 in 2Q 2013.  Average daily room rates rose $9.03 in 2Q 2013.

New Management Company

Riviera Holdings entered into a two year management agreement with Paragon Gaming on June 21, 2013.  On that same day, Vegas Inc reported that Andy Choy and Noah Acres left Riviera’s management team.

North Las Vegas Strip Struggling

The Riviera, which opened in 1955, has been adversely affected by changes along the north end of the Las Vegas Strip.  The past decade has seen the demise of New Frontier, Sahara, Stardust and Westward Ho.  All of these resorts complimented Riviera’s old school Las Vegas style.  The unfinished 63-story Fontainebleau sits just north of Riviera. 

The only casinos in the general vicinity of Riviera that remain open are Slots-A-Fun and Circus Circus.  Both of these properties are owned by MGM Resorts. 

There are signs of life on the north end of the Las Vegas Strip.  The reopening of the former Sahara property as SLS Las Vegas is just over one year away.  Genting plans to develop the Asian-themed Resorts World Las Vegas on the former Stardust property that will pump billions into the Strip and draw tourists from all over the world. 

Sources: Riviera Holdings 2Q 2013 10-Q SEC Filing – Riviera Holdings 2012 10-K Annual Report – Management Discussion of Operations

Image Credit: Creative Commons License 2.0 Alex Proimos