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Debt Agencies Differ on Riviera Holdings Corporation Rating Over
Deal to Sell the Riviera Black Hawk Casino in Colorado

By Steve Green, Las Vegas SunMcClatchy-Tribune Regional News

Oct. 04, 2011--Moody's Investors Service today lowered its rating outlook on the debt of Riviera Holdings Corp. of Las Vegas because of the company's plan to sell its Colorado casino for $76 million.

Fellow debt rater Standard & Poor's, however, today said the deal may not cause it to alter its ratings outlook on Riviera Holdings.

Moody's said it changed the outlook on Riviera Holdings from stable to negative as Moody's noted the deal leaves Riviera Holdings reliant on its Riviera hotel-casino in Las Vegas.

Riviera announced last week it's selling the Riviera Black Hawk in Colorado to Monarch Casino & Resort Inc. of Reno, owner of the Atlantis Casino Resort Spa in Reno.

Riviera Holdings, in announcing the sale, said the deal was a positive in that it would allow the company to "focus on turning around the historic Riviera Las Vegas."

Moody's analysts, however, said today the 2,075-room Riviera Las Vegas had generated negative EBITDA in the 12 months ended June 30.

EBITDA is a key profitability measure meaning earnings before interest, taxes, depreciation and amortization.

"This property is located in a market that still faces a number of headwinds. Moody's believes the recovery of the Las Vegas Riviera will be slow due to the anemic pace of economic growth in the United States and Moody's expectation that gaming budgets will not increase materially in the near-term," Moody's said in today's report.

Despite lowering Riviera Holdings' ratings outlook, Moody's affirmed its B3 corporate family and other ratings.

Moody's said that depending on how much bank debt Riviera decides to pay off with the Colorado sales proceeds, Riviera could end up holding as much as $50 million in cash -- giving it plenty of liquidity in the near term.

Moody's action today affected about $71 million of rated debt. As of June 30, Riviera Holdings had $112.9 million in debt and other liabilities.

Standard & Poor's, in the meantime, said the deal may not change its CCC+ rating and stable outlook on Riviera Holdings.

"There remains some uncertainty around the timing of the close of the transaction, which is contingent upon Monarch being issued a gaming license by Colorado gaming authorities, as well as Riviera's planned use of the cash proceeds," S&P analysts said in a note on the deal. "While a substantial portion of proceeds will likely be required to repay Riviera's credit facility to maintain compliance with financial covenants, EBITDA generation at Riviera's Las Vegas property is limited and we believe the property remains disadvantaged relative to its competitors on the Las Vegas Strip and downtown Las Vegas.

"Thus, despite the potential for substantial debt repayment, the closing of this transaction may not affect our current assessment of Riviera's credit quality," the S&P report said.

The CCC+ rating by Standard & Poor's and the B3 rating by Moody's are both in speculative grade territory.


(c)2011 the Las Vegas Sun (Las Vegas, Nev.)

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