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Gaming Guru

Arnold M. Knightly
 

Hard Rock Hotel negotiating $1.28 billion expansion loans

14 August 2009

LAS VEGAS, Nevada –- The Hard Rock Hotel is in talks with lenders to push back a Feb. 9 maturity date on $1.28 billion in loans the owners used to purchase and expand the property, according to a filing with the Securities and Exchange Commission.

The company's agreement with lenders who hold $1.28 billion in commercial mortgage-backed securities already includes two possible one-year extensions if the property meets "certain conditions," which were not disclosed in the filing.

The Hard Rock Hotel's chief financial officer, Dean Boswell, however, said the company is asking its lenders to agree to push the loan's maturity date to February 2014.

Boswell said there was "nothing to report other than that we're in discussions with the lender. We can't say if it will be done or not done."

The news comes as the Hard Rock Hotel reported widening losses in the second quarter.

The property posted a net loss of $21.1 million for the quarter ended June 30, a 65.1 percent increase from the $12.8 million loss recorded for the same quarter last year, the Monday filing said.

The drop drives the company's six-month loss to $47.7 million this year. The losses are driven by nearly $20 million in interest expenses each of the first two quarters of the year.

The Hard Rock Hotel reported that its loss from operations in the second quarter was $1 million, a drop from the $3.1 million in net income from operations realized the same time last year.

The property posted a $7.9 million loss from operations the first six months of the year.

However, the opening of new amenities such as the new 4,000-seat Joint, 65,000 square feet of convention space and a new porte-cochere during that period helped narrow the property's revenue decline quarter to quarter.

Revenues fell 4 percent to $47.1 million in the quarter, down from $49.1 million last year and a sharp swing from the 26.1 percent revenue decrease experienced in the first quarter.

Revenues for the year have dropped 14 percent, to $77.1 million from $89.7 million.

Entertainment revenues increased by $4.5 million in the quarter, attributed by management to The Joint's opening in April.

Quarterly casino revenues dropped 14.2 percent and revenue for the 642-room hotel fell 26.6 percent, driven by a drop in average daily room rates to $170 from $217. Occupancy slipped to 92.3 percent from 94.3 percent last year.

The downward pressure on room rates is expected to continue despite the opening in late July of the 490-room Paradise Tower and the scheduled opening of 375 more rooms in December.