Now that it’s out of bankruptcy, the owner of the 2,075-room Riviera hotel-casino on the Las Vegas Strip should have no trouble generating enough cash to meet its obligations.
That’s according to Moody’s Investors Service, which today issued ratings on $80 million in debt carried by the post-bankruptcy Riviera Holdings Corp.
"Given rising visitation to Las Vegas, Moody's expects Riviera can grow EBITDA modestly and we expect debt to EBITDA to decline to approximately 8.25 times and 6.75 times by year-end 2011 and 2012, respectively," Moody’s said in today’s report. "Riviera is expected to generate sufficient cash flow to fund interest, working capital and a modest level of maintenance capital spending."
EBITDA is a profitability measure meaning earnings before interest, taxes, depreciation and amortization.
"The rating outlook is stable given Riviera's good liquidity and Moody's view that earnings will grow modestly over the next year," Moody’s said.
Still, as is consistent with most casino companies, Moody’s assigned a speculative-grade B3 corporate family rating to Riviera Holdings, which also has a casino in Black Hawk, Colo. The Colorado property has 746 slot machines, nine table games, a buffet and similar casino-type amenities.
"The B3 Corporate Family Rating reflects high pro-forma financial leverage -- debt to trailing EBITDA is 11 times, earnings concentration from two casino properties, our expectation of a slow recovery for the company's Las Vegas property and a short operating history under the current management team. Ratings are supported by the consistent earnings generated by the casino in Black Hawk, Colo., and the company's good liquidity," Moody’s said.
In the first quarter, Riviera Holdings lost $2.2 million vs. a loss in the year-ago quarter of $4.5 million.
The company was taken out of bankruptcy this spring by hotelier Barry Sternlicht and other investors. The bankruptcy process was expected to eliminate some $276 million in debt and other liabilities.