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Arnold M. Knightly

Hooters Hotel reports big net loss

19 May 2009

LAS VEGAS, Nevada -- Another local casino property in default on its debt did not receive good news with its first-quarter earnings.

Hooters Hotel widened its net loss in the first quarter, with steep declines in hotel revenues driven by fewer overnight visitors and lower room rates.

The off-Strip property posted a net loss of $4 million in the first quarter ended March 31, a filing late Friday with the Securities and Exchange Commission shows.

The loss nearly doubles the $2.2 million loss posted in the same quarter last year.

Net revenues fell 19.2 percent, to $13.3 million from $16.5 million last year, driven partially by an 18.4 percent decrease in casino revenues.

The 696-room hotel, however, saw revenues drop 32.4 percent as average daily room rates were cut 35 percent to $52 per night. Occupancy fell from 87.9 percent to 82.8 percent for the quarter.

Barbara Cappaert, a bond analyst with KDP Investment Advisors, said second-tier properties such as Hooters will "recover later than the larger casinos."

She continued, "For Hooters, this will mean highly promotional room rates for some time," due to lower rates by "better capitalized Las Vegas Strip operators."

Cash flow, defined as earning before interest, taxes, depreciation and amortization, dropped by 50 percent to $1.67 million in the quarter.

The property went into default, something Cappaert predicted in early February, on two separate facilities totaling $144.5 million after the quarter ended. The letter of default was received on April 7 from Wells Fargo Foothill, the administrative agent on the loans.

The property's ownership had announced March 31 that it was not going to pay an interest payment due the next day.

The property had nearly $8 million in cash and the owners would continue to pay employees and vendors without interruption, the March 31 statement said. The property's owners are in discussions with some lenders about a possible forbearance agreement while the negotiations on a possible debt restructure continue, a May 7 federal filing said.