Riviera received a notice of default at the end of February for its failure to provide a Deposit Account Control Agreement to Wachovia that would have given Wachovia access all of Riviera' s operating cash and transferred it to a bank account specified by Wachovia. The following month Riviera acknowledged "substantial doubt" about the company's ability to continue as a going concern, Skipped a $4-million interest payment and released its fourth quarter result, a net loss of $12.7 million.

The initial default resulted in the interest rate on its term loan increasing 100 basis points to 8.5%. It also allows Wachovia to seek an additional default interest payment equal to 2% of the company's outstanding principal, and to automatically charge and additional default interest of 1% on any overdue amounts.

Wachovia says it continues to try to negotiate a waiver or forbearance agreement regarding the defaults. If it cannot, Wachovia may accelerate repayment of all amounts outstanding under the credit facility; foreclose on some or all of its assets securing the debt; or exercise other rights and remedies. If it does and Riviera can't pay, it would likely seek protection from creditors under Chapter 11 of the US Bankruptcy Code.

Neither company chairman William Westerman nor CFO Phil Simons could be reached Friday afternoon for comment. Previously, Westerman said the decision to default was "both difficult and unpleasant" because the company has always prided itself in on paying all its obligations on a timely basis. "However, in view of the continuing devastating competitive pressure on room rates, the rapidly depreciating convention attendance in the Las Vegas market, and the input of our financial adviser, we determined it was imperative and in the best interests of our company to maximize our liquidity by retaining the funds that would have been employed to pay the first quarter interest," he said.

Instant Insights /

Riviera Misses Another Interest Payment

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