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MrDebtBuster
Aug. 2 (Bloomberg) -- The Hooters Casino Hotel filed for Chapter 11 protection late yesterday to stop a scheduled Aug. 8 foreclosure of the second-lien debt. The 696-room hotel and casino adjacent to MGM Grand on the Las Vegas Strip is owned by 155 East Tropicana LLC.
The two secured credit facilities were accelerated early this year. Canpartners Realty Holding Co. IV LLC acquired 98.4 percent of the $130 million in 8.75 percent second-lien senior secured notes. Canpartners bought the debt at a “substantial discount,” the casino said in a statement.
An additional $32.2 million of interest is owing on the second-lien debt. US Bank NA is indenture trustee.
Holders of the $14.5 million in first-lien debt have Wells Fargo Capital Finance Inc. as their agent. The first-lien obligation is fully secured, the casino said in court filings. Interest has been paid currently at the default rate.
The hotel said it was a victim of the recession and the ensuing decline in consumer spending. Revenue fell to $43.6 million in 2010 from $66.5 million 2007. Last year, there was as $59.3 million loss from operations and a $73 million net loss, including a $55.2 million asset-impairment charge.
For six months this year, revenue of $22.4 million resulted in a $4.9 million net loss. The business would be profitable without “substantial debt payments,” the casino said. With a prepackaged filing not possible, the casino said in its statement that it would use Chapter 11 “to properly restructure the balance sheet.”
An exhibit to the bankruptcy petition said that $16 million is the extent of the collateral covering the second-lien debt mostly owing to Canpartners. The casino first began defaulting on the notes in April 2009, court papers say.
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