Riviera says it doesn’t plan to file for bankruptcy this week

Riviera Holdings Corp. let another deadline slip by Thursday without making a $4 million loan payment but said it is still in talks with Wachovia Bank about restructuring its debts outside of bankruptcy court.

Phil Simons, the company’s chief financial officer, said Thursday the company isn’t planning to file for bankruptcy this week because of the ongoing talks.

Riviera Holdings Corp. announced Tuesday that it didn’t make a payment that was due Monday on a $245 million credit facility with Wachovia Bank and that it would let a three-day grace period expire without making the payment.

A spokeswoman for Wachovia declined comment Thursday, saying it does not comment on any discussions it has with its customers.

Nancy Rapoport, a bankruptcy law professor at the University of Nevada, Las Vegas, however, said the negotiations will probably come down to deciding which side blinks first.

“You have a debtor threatening to jump out the window and the creditor threatening to push,” said Rapoport, paraphrasing one of her classroom textbooks. “At one point, someone is going to jump or push.”

The latest gaming company crisis began early last month when Wachovia served a notice of technical default on bank loans held by Riviera Holdings after the gaming company refused to give Wachovia access to all of the cash in its bank accounts.

The bank said it wanted access to the bank accounts in case the gaming company issued a notice of default on its loans.

The missed $4 million interest payment that was due Monday led the company to suggest Tuesday that it may have to file for bankruptcy before the week was up.

Riviera Holdings Chief Executive Officer William Westerman said in a statement Tuesday that the company decided against making the payment so it could maintain enough liquidity to cover its operating expenses.

Westerman’s Tuesday statement said the company was in discussions with the bank, although “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.”

Rapoport, who has written extensively on the Enron collapse, said Wachovia would be in a weakened position if it waits to negotiate new financing terms after the Riviera goes into bankruptcy.

Barbara Cappaert, a credit analyst with KDP Investment Advisors, said in a note to investors Tuesday that the bank would be best served taking over the company either through a foreclosure or in a prepackaged bankruptcy.

Valuations today on “Strip properties are at decade lows,” Cappaert wrote. “Given the state of the capital markets, little lift in values via transactions will occur for some time. However, over the next three years, as Las Vegas recovers, the 26 acres under the Riviera (on the Strip) will once again attract interest.”

Riviera Holdings shares closed below the $1 mark Thursday for the second day in row.

The shares slipped 4 cents, or 4.49 percent, to close at 85 cents on the American Stock Exchange.

The stock’s value has dropped approximately 82 percent in 2009 since peaking at $4.79 per share on Jan. 6.

The stock hit an all-time high of $39.12 on June 20, 2007, because of buyout rumors and speculation on the value of the Riviera’s 26-acre site.

Trading volume of the stock Thursday was 143,000 shares, roughly four times the stock’s average daily volume, according to Yahoo Finance.

Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893.

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