Hooters Casino Hotel files for Chapter 11 protection.
The Las Vegas casino was bought by Hooters in 2004 for $74.6 million and is now filing for Chapter 11 to stop a scheduled August 8 foreclosure of the second-lien debt. With the Chapter 11 filing the hotel is seeking a financial restructuring of its current debt.
The Hooters Casino Hotel, owned by 155 East Tropicana LLC, filed for bankruptcy listing only $10 to $50 million in assets against larger liabilities of $162 million. The hotel and casino has continuously seen a steady lose in revenue. This year it lost $3.9 million in the first quarter, which was about even with the $4 million lost in the first quarter of 2009.
“We regret that we have been unable to reach an acceptable settlement with our new bondholder,” the company said. “We are confident that an orderly and transparent Chapter 11 process will provide the company with the opportunity to properly restructure its balance sheet and emerge as a stronger company.”
The Hooters Casino Hotel is adjacent to the MGM Grand on the Las Vegas Strip and has 696 rooms. Despite its ample overhaul, valued at $190 million, and dropping its average daily room rates from $52 to $46 the hotel-casino can’t seem to make money.
“The company does not believe it will be able to generate sufficient cash flows from operations to fund its financial commitments over the next year and cannot provide any assurances that it will be able to raise additional capital,” Hooters said in its quarterly report.
With an oversupply of hotel rooms there is stiff competition and despite that Hooters did manage to lift its occupancy rate from 83 percent in the first quarter of 2009 to 86 percent for the 2010 first quarter. Unfortunately that alone won’t cut it.
The company said the bankruptcy filing in “no way affects the operation” of Hooters restaurants, which are owned or franchised by Hooters of America LLC in Atlanta.
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