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Steve Green

Riviera reports quarterly loss

11 May 2009

At a glance...

+Las Vegas revenue plunged as visitation to the city declined and convention attendance fell

+Company defaulted on debt, failed to make $4 million in interest payments

+Riviera unable to gain walk-in traffic from Fontainebleau because of delays there


LAS VEGAS, Nevada -- Riviera Holdings Corp., owner of the Riviera hotel-casino on the Las Vegas Strip, on Friday reported another quarterly loss. The company said business conditions in Las Vegas remain weak and that it may suffer from delays in construction of the nearby Fontainebleau resort.

The company said revenue for its Las Vegas property plunged 32.9 percent in the first quarter to $24.462 million as the recession reduced visitation to Las Vegas and especially hurt the convention business that is important to the Riviera.

Including its casino in Black Hawk, Colo., revenue declined from $47.962 million to $34.656 million and the company reported a loss of $1.037 million or 8 cents a share vs. a loss in the year-ago quarter of $5.783 million or 47 cents. One reason the loss declined is because Riviera didn't make $4 million in required debt payments.

Riviera stock traded Friday morning at $2, up 20 cents. In the past year it has traded as low as 79 cents and as high as $18.12.

The company, which defaulted on a debt agreement when it chose not to make the interest payments in the quarter ending March 31, said it continues to work on a restructuring that may be carried out either in or out of bankruptcy court.

Chairman and Chief Executive Officer William L. Westerman said in a statement:

"We regret that current economic conditions forced us to make the decision to not pay our interest, which was due at the end of March. However, the continuing devastating competitive pressure on room rates, the rapidly declining visitation to Las Vegas, especially by convention attendees, verify we made the correct decision. It was necessary to retain the funds which would have been employed to pay the first quarter interest so as to maximize our liquidity.

"Both our Las Vegas and Black Hawk properties are generating positive free cash flow and this, combined with our cash balances, will help ensure 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 and with the aid of our financial advisors develop a restructuring plan 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 2008 continued as evidenced by our first quarter results. We expect this situation to continue as long as competitors in the Las Vegas market follow a strategy of sacrificing ADR (average daily room rate) to maximize room occupancy and the decline in convention business is unabated. In Black Hawk, payroll and marketing expenses will increase as we prepare for the implementation of Proposition 50 on July 2 (expanding games, limits and hours). Furthermore, we are concerned that the temporary or permanent suspension of construction by our next door neighbor in Las Vegas, Fontainebleau will reduce opportunities to market to `walk-in,' traffic, which we hoped would be a positive to our gaming and food and beverage revenue. 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."