Bankrupt Riviera Acquired by Starwood Capital
July 15th, 2010 | Published in Casino News
The long-standing Riviera Hotel and Casino filed for Chapter 11 bankruptcy this past Monday; a sad day in the Las Vegas casino community. However the Starwood Capital Group is contributing to the takeover of both the Las Vegas and Colorado locations. The Riviera stated that more than two-thirds of its $270 million worth of debt has been supported by holders with the primary debt holder being Starwood Capital.
Barry Sternlicht
Starwood Capital is headed by Barry Sternlicht, a hotel industry giant. During the late 1990’s he ran the Caesars World. He is also well known for expanding the Heavenly Bed at Westin Hotels. Up to this point he hasn’t commented on this progressive takeover. He is also well known in the real estate industry as being an entrepreneurial real estate investor. Recently, Barry raised $3 billion in two years for investment in loan portfolio Corus Bancshares.
Terms of the Deal
Starwood Capital and other investors completed a deal with Riviera Holdings to exchange their debt for controlling equity stake in the company. Also they will provide $10 to $30 million in financing to the Riviera. Other terms of the deal were that $220 million of the debt will be paid back leaving only around $50 million.
The Future
There are plans to continue to operate as the bankruptcy filing has had little effect on the Riviera’s operations. Their plans are to restructure its indebtedness and allow for new investment into the company. The hope is to emerge in a much improved financial situation with a stronger operational advantage.
Unfortunately stockholders will receive no return on investment. The Riviera foresees little recovery for equity holders. This filing will provide the Riviera properties with a viable capital structure and additional financing to expand. Since both Riviera Holding properties are continuing to show a positive cash flow, the money will be used to pay operating costs in a timely manner and fund maintenance expenditures.
Reasons for the Filing
The primary reason for filing Chapter 11 is the economy. The Riviera lost $4.5 million in the first quarter of 2010. The company has been hurt by declines in trade show and convention attendance and the establishment’s isolated location.
The Riviera appears to have a strong rebound plan. With proper money management, a rise in the global economy and clever marketing techniques, they may be able to return to their old profitable ways.