"The company cannot be assured that it will be successful in completing a refinancing or restructuring. If the company is unable to do so, it may determine to seek protection under Chapter 11 of the US Bankruptcy Code," the company said, as it has in each of its recent reports.
Located one-half block from the intersection of Tropicana Avenue and the Las Vegas Strip, Hooters Hotel-Casino was previously the Hotel San Remo. 155 East Tropicana LLC agreed to acquire Hotel San Remo in 2004 for approximately $72.5 million. It then spent approximately $63 million renovating, outfitting and re-opening the property in February 2006 as Hooters. It has had a tough time competing in the market ever since.
In the quarter just passed, the property produced a net loss of $5.38 million on revenue of $10.73 million. In the same year-earlier period, the company produces a loss of $5.26 million on revenue of $14.21 million. The $3.48-million drop in revenue offset a $3.55 million drop in operating expenses. In addition to a general decline in tourism and spending, the drop in revenue was attributed to road work in front of the property that reduced walk-in traffic.
155 East Tropicana LLC is two-thirds through Florida Hooters LLC and one-third through EW Common LLC. Florida Hooters LLC is a joint venture between most of the original founders of the Hooters brand, who hold licenses to operate Hooters restaurants in the Tampa Bay, Chicago and Manhattan areas as well as for wholesale foods, calendars and Nevada hotel/gaming, and a holder of the license rights to Hooters restaurants in south Florida. EW Common LLC is 90% owned by Eastern & Western, which is beneficially owned by Sukeaki and Toyoroku Izumi. Eastern & Western and its affiliates owned the Hôtel San Rémo from November 1988 until the acquisition of the hotel casino in August 2004.
In 2008, ownership terminated a $225-million deal to sell the hotel to Hedwigs Las Vegas Top Tier LLC, an affiliate of an investment group led by NTH Advisory Group LLC. The deal was terminated after the would-be buyer missed a required $500,000 option carry payment. Hedwigs Las Vegas Top Tier LLC made a total of $5.5 million in non-refundable payments toward the purchase, which called for $98 million in cash, the payment of certain accrued royalties, and the assumption of certain outstanding liabilities, including $130 million in principal amount of 8¾% senior secured notes due 2012.
The company missed multi-million-dollar interest payments on its now $147 million in debt in April and October of this year. As a result, while the lenders have not exercised all their remedies, ownership no longer has an option of paying the LIBOR interest rate on its debt, but must pay the Wells Fargo prime rate plus the default rate, which is equal to four percentage points above prime rate. Wells Fargo Foothill Inc. is the servicing agent for the lender group.
Hooters hotel and other revenue--which includes hotel room revenue, retail, and other miscellaneous revenue--decreased by 26.2% to $3.5 million in the third quarter of 2009 from $4.8 million in the same year-earlier period. The room revenue decline of 34.3% to $2.3 million was the source of most of the revenue decline. It was attributed to the increased competition for customers among hotel casinos in Las Vegas due to the drop in tourism. Average daily room rates decreased by18.9% to $47 from $58 in the same year-earlier period.
Hooters' casino revenue in the quarter fell by 33.1% to $4 million from $6 million in the same year-earlier period. The average drop in casino revenue all Las Vegas Strip properties in the third quarter was 7.9%. The average drop for Strip casinos with annual gaming revenue of between $12 million and $36 million was 20%, according to the state Gaming Control Board. Hooters' food and beverage revenue fell 20.1% to $4.5 million from $5.6 million in the same year-earlier period. Entertainment revenue declined by $300,000 due to a revenue split with entertainers that began earlier this year.
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